China must cut 15% of steel capacity to meet 2025 climate goals

CHINA needs to tackle its steel glut by cutting 15 per cent of capacity this year, if mills are to meet their 2025 climate goals and return to profitability, according to clean energy analysts.

To get back on track, the country’s annual blast furnace capacity has to shrink by at least 200 million tonnes from its 2020 base – the equivalent of the whole of the European Union’s steel industry, the Centre for Research on Energy and Clean Air (Crea) said in a report on Wednesday (Feb 26). Another 150 million tonnes needs to be zeroed out by the end of the decade.

The government has tried to guide production lower by tying output to emissions. But the country’s still pumping out too much steel, which in 2024 topped one billion tonnes for the fifth year in a row. The sector accounts for about 17 per cent of China’s total emissions, according to Crea, and is still too heavily reliant on coal.

Steelmakers have suffered from a collapse in earnings and the industry lost money for most of last year. But overcapacity isn’t just an issue for China. Its steel exports have fanned global trade tensions after surging to a nine-year high in 2024.

The climate and capacity problems can be fixed by dramatically cutting down on highly polluting blast furnaces, and speeding up the adoption of low-carbon technologies such as electric arc furnaces and green hydrogen, Crea said.

China’s EAF steelmaking accounts for less than 10 per cent of output, below the government’s target of 15 per cent for 2025. BLOOMBERG

Share with us your feedback on BT's products and services