China to slash steel output for third year to reach climate goals


China to slash steel output for third year to reach climate goals


China will again decrease its yearly crude steel production in 2023, according to a source familiar with the matter. This move will mark the third consecutive year in which the government has imposed forced cuts to output to curb carbon emissions from the highly polluting industry.

China is the world's largest producer and consumer of alloy, which underpins its industrial economy. Since production hit a record of 1.053 billion tons in 2020, it has decreased annually, hovering just above 1 billion tons. The sector accounts for roughly 15% of national emissions, the second largest after electricity generation.

The Chinese government will also prohibit the construction of new steel plants, the person familiar with the matter said. China’s economic planning agency, the National Development and Reform Commission, didn’t respond to a request for comment.

The industry has been set a target of peaking emissions by 2030, aligning with the national economy's deadline – although the goal would have already been achieved if production continuing to drop throughout the decade.

While the Chinese government is implementing large-scale stimulus measures to boost economic growth, the proportion of steel utilized is declining as the economy shifts toward less metal-intensive infrastructure. Furthermore, the government's efforts to regulate the property market have dampened demand for alloy.

Some of the global mining giants, including Australia's BHP Group and Brazil's Vale SA, depend heavily on China's steel mills to absorb the large volumes of iron ore they produce. As a result, weakened demand from the country is likely to impact their earnings.

Despite a 5.6% increase in Chinese steel production to 169 million tons in the first two months of 2023, Beijing's conservative growth targets for the industry revealed at its annual legislative meeting in March have led to lowered expectations of a significant increase in demand.

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