China recently unveiled an ambitious "Special Action Plan for Carbon Reduction," targeting enhanced carbon neutrality, energy efficiency, and emission reductions. This comprehensive initiative, launched by the National Development and Reform Commission (NDRC), aims to shift the steel industry towards electric arc furnace (EAF) production, thereby decreasing the demand for iron ore and coal.
The plan emphasizes upgrading existing equipment and increasing EAF usage to significantly reduce raw material consumption and emissions by 2030. Although immediate impacts may be limited, market participants anticipate a long-term decline in demand for these materials.
In June, the NDRC set specific goals to reduce energy consumption and emissions in the steel industry by 2030. These goals include a more than 1% reduction in per-ton energy consumption for blast furnace and converter processes from 2023 levels by 2025, along with a 2% reduction in energy consumption per ton of steel production, and a 3% increase in the use of waste heat and pressure.
To achieve these objectives, the NDRC plans to encourage greater EAF usage and accelerate energy-intensive equipment upgrades. Industry insiders predict that while 2024 may see minimal impact, the long-term demand for iron ore and coking coal will decline.
A northern China steel company representative noted that the short-term impact on coking coal demand might be minor, but the long-term demand is likely to decrease. Similarly, a raw material supplier in Shanxi Province pointed out that demand for iron ore and coking coal will diminish as EAF production replaces some blast furnace output.
In response to these policies, the proportion of EAF production is expected to rise, with the Chinese government and steel industry pushing for increased iron ore self-sufficiency. According to the China Iron and Steel Association (CISA), domestic iron ore concentrate production is projected to increase by 5-10 million tons in 2024 compared to 2023, reaching 370 million tons annually by 2025, aided by new iron ore projects.
Mysteel estimates that by 2025, total iron ore production from Chinese companies' overseas holdings will exceed 70 million tons per year, a more than 60% increase from 2020. Consequently, with overall iron ore demand declining, iron ore production expansion projects are expected to continue, gradually reducing dependence on iron ore imports from this year onwards.
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