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Chinese steel investment needs to avoid lock in: CBI

  • : Hydrogen, Metals
  • 24/10/15

Chinese investment in steel assets needs to be aligned with a Paris-compatible scenario to avoid locking in emissions and stranded assets, according to a report by non-profit Climate Bonds Initiative (CBI).

Almost 80pc or 730.8mn t/yr of China's existing coal-based blast furnace capacity will need to be retired or require reinvestment by 2030, CBI said in its report released last week. Steel asset lifetimes often exceed 40 years, so "investment decisions made today can lock in billions of tons of emissions and potentially billions of dollars in stranded assets", CBI added.

Steel production currently accounts for around 8pc of global CO2 emissions, and almost 50pc of global steel output is from China, CBI said. China's steel sector is estimated to require at least 1.6 trillion yuan ($226bn) in fixed asset investment for decarbonisation by 2050, according to a joint report by CBI and US-based Rocky Mountain Institute (RMI) earlier this year. Of the Yn1.6 trillion, 33pc should go to energy efficiency, 23pc for electric arc furnaces, 18pc for direct iron reduction (DRI), 14pc for carbon capture, utilisation and storage (CCUS), 7pc for blast furnace hydrogen injection, and 5pc for pellet manufacturing.

Green bonds

Steel companies can obtain financing through labelled green bonds from various categories at the project level, including energy efficiency, heat recycling, waste and resource recycle, green hydrogen, biomass, and CCUS.

A total of Yn4.46 trillion of labelled green bonds had originated from China in domestic and overseas markets as of the end of 2023, according to CBI. But Chinese steel firms had only issued 23 green bonds totalling Yn3.5bn and six sustainability-linked bonds totalling Yn1.6bn by the end of last year, representing 0.1pc of the total Chinese labelled bond market. This Yn5.1bn falls very short of the estimated Yn1.6 trillion needed to decarbonise the Chinese steel sector.

CBI asserts that the labelled bond and loan market can supply the required capital, but issuers operating in the steel sector must be encouraged to price deals with the recommended transparency and credibility.

Recommendations

Several Chinese provinces have already issued provincial-level transition finance guidance, including major steel-producing Hebei province this year. But China's national-level transition finance guidance remains under development.

CBI thus recommends that the national transition taxonomy further align provincial guidelines and "enhance interoperability" between Chinese and international transition taxonomies, incentivise low-carbon production methods, customise financing for small-to-medium companies, and enhance entity-level transition plans.

CBI also suggests that banks incentivise companies to enhance the quality of their information disclosure and integrate such incentives into their transition frameworks. The non-profit also urged steel companies to issue credible transition plans, which should include Paris-aligned emission-reduction targets and clear capital expenditure plans.

Lastly, CBI notes that policies should support hydrogen infrastructure and supply chain development to accelerate green hydrogen deployment for high-emitting sectors. This is especially as current financing to decarbonise heavy industrial sectors have mainly been for mature technologies, such as raising energy efficiency. But green hydrogen can reduce over 90pc of steel production emissions, and steady development in hydrogen infrastructure and supply chain will cut costs and accelerate the steel transition.

CBI also flagged public sector steel procurement as an avenue through which the country can boost demand for green steel, especially since Chinese public authorities buy about 350mn t/yr of steel, which causes around 689mn t/yr of CO2 emissions. Green public procurement (GPP) policies in China would also have a global impact, with steel public procurement demand in China three times that of India's total steel demand of 100mn t/yr. CDI suggests that the Chinese government accelerate adopting national-level standards to ensure consistent embodied emissions reporting, as GPP policies will only be effective when implemented with standardised methodologies.


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24/11/06

EU expected to approve climate, energy commissioners

EU expected to approve climate, energy commissioners

Brussels, 6 November (Argus) — Former Danish climate minister Dan Jorgensen is expected to be confirmed late this month as EU energy and housing commissioner, having received clear support after his hearing in front of EU parliament members. Similarly, centre-right political support is expected to ensure a vote for reconfirmation of Wopke Hoekstra as climate commissioner. Jorgensen has received approval from the joint hearing committee, after his hearing yesterday. During the hearing, he promised a plan for affordable energy, a roadmap to end Russian energy imports, a clean energy investment plan and an electrification action plan. He focused on cost, noting the need to work towards lower energy prices in Europe and recognised nuclear energy as "part of the solution". But Jorgensen avoided giving detail on contentious issues, adding no precise date for an end to Russian energy imports. Although he backed a 2040 renewables target, he gave no approximate percentage share, or range, for renewables in final energy consumption by that date. German member Christian Ehler said his centre-right EPP group would "in the end" support Jorgensen following "reasonable" performance. Ehler wants the future commissioner's statements on hydrogen and related delegated acts, especially on low-carbon hydrogen, to be "concretised quickly". Industry group SolarPower Europe welcomed Jorgensen's clarity around not seeking fundamental changes to electricity market rules, but their proper implementation. A power industry source, though, pointed to his "other ideas" on specifics, notably on how to increase market liquidity . Documents prepared for the 7 November hearing of current climate commissioner Wopke Hoekstra give little concrete detail on revision of the bloc's emissions trading system (ETS). Hoekstra is expected to take a similarly cautious approach as that of designated EU agriculture commissioner Christophe Hansen on ETS integration to cut agriculture's 11pc share of EU greenhouse gas (GHG) emissions. But Hoekstra is expected to be more open about using the 2026 ETS review to lower thresholds for EU ETS inclusion from 2031, including for maritime shipping, bioenergy with carbon capture and storage (Beccs) and direct air capture with carbon storage (Daccs). The European Parliament is expected to vote on the new commissioners during its 25-28 November plenary in Strasbourg. By Dafydd ab Iago Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

UK parliament approves SAF mandate from 2025


24/11/06
24/11/06

UK parliament approves SAF mandate from 2025

London, 6 November (Argus) — The UK parliament has approved the proposed sustainable aviation fuel (SAF) mandate that will come into effect on 1 January, 2025. Obligated suppliers will have to deliver a 2pc share of SAF in 2025, increasing to 10pc in 2030, 15pc in 2035 and 22pc in 2040. The obligation will remain at 22pc from 2040 "until there is greater certainty regarding SAF supply". The obligation arises at the point at which a supplier's jet fuel can be supplied only to UK aviation. Hydrotreated esters and fatty acids (HEFA) SAF can be used to meet 100pc of SAF demand in 2025 and 2026, but will be capped at 71pc in 2030 and 35pc in 2040. An obligation for Power-to-Liquid (PtL) SAF will be introduced from 2028 at 0.2pc of total jet fuel demand, rising to 0.5pc in 2030 and 3.5pc in 2040. Buy-out mechanisms will be set at the equivalent of £4.70/l ($6.10/l) and £5.00/l ($6.50/l) for the main and PtL obligations, respectively. "It is projected that, between 2025 and 2040, the SAF mandate could deliver up to 25mn t of SAF, securing a saving of up to 54mn t of carbon dioxide", said transport minister John Hendy. The UK confirmed on 17 July it will introduce the Sustainable Aviation Fuel (Revenue Support Mechanism) bill to support SAF production. The government previously said it aims to introduce the mechanism, which will be industry funded, by the end of 2026 . "Together with the SAF mandate, [the mechanism] will give the investment community confidence to invest in these novel and innovative technologies", Hendy said. By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Boeing workers approve contract, end strike: Update


24/11/05
24/11/05

Boeing workers approve contract, end strike: Update

Includes additional contract details in 3rd and 4th grafs, and background on Boeing. Houston, 5 November (Argus) — Union-backed machinists approved a new labor contract with aircraft manufacturer Boeing, ending a seven-week work stoppage that halted production of major jet programs and disrupted aerospace supply chains. More than 32,000 factory workers represented by the International Association of Machinists and Aerospace Workers (IAMAW) voted by 59pc to ratify the deal, the local union said late Monday. Employees secured a general wage increase (GWI) of 38pc spread out over the contract's four-year life, a one-time $12,000 ratification bonus and greater 401(k) contributions, among other retirement and health care benefits. The pay raise — a sticking point in prior rounds of negotiations — improved upon Boeing's first two offers of 25pc and 35pc but fell short of the 40pc sought by workers. Still, the union touted that the GWI in the new contract amounts to 43.65pc when compounded. Boeing chief executive Kelly Ortberg acknowledged the past few months "have been difficult" in expressing his appreciation that both sides were able to come to terms. Workers began their strike on 13 September, effectively shutting down Boeing's final assembly lines in Renton and Everett, Washington, where the company produces its flagship 737 MAX aircraft, along with its 767 and 777 programs. That stoppage further exacerbated issues within Boeing's operations that have been under heightened scrutiny since January, when a midair panel blowout led to a mandated production cap on the 737 MAX. Additionally, parts shortages and other supply chain challenges have constrained output of the company's main widebody program, the 787 Dreamliner, this year. The strike itself compelled Boeing to initiate cost-cutting measures with the production halt weighing on its finances . The company on 11 October announced it would lay off 10pc of its total workforce, while confirming on 23 October that it had stopped shipments from certain suppliers to conserve cash. The latest estimate from Anderson Economic Group, which does not account for last week, puts Boeing's losses at $5.5bn and its suppliers' losses at $2.3bn because of the work stoppage. All workers must return to their positions by 12 November but can return as early as Wednesday, the union said. Still, Boeing cautioned that it would take time for operations to stabilize, saying it would have to retrain and recertify employees who did not "get enough time on an airplane" before they went on strike. The company also will have to contend with a supply chain that it "turned off in many cases" because of the work stoppage. By Alex Nicoll Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Boeing workers approve contract, end strike


24/11/05
24/11/05

Boeing workers approve contract, end strike

Houston, 5 November (Argus) — Union-backed machinists approved a new labor contract with aircraft manufacturer Boeing, ending a seven-week strike that halted production of major jet programs and disrupted aerospace supply chains. More than 32,000 factory workers represented by the International Association of Machinists and Aerospace Workers voted by 59pc to ratify the deal, the local union said late Monday. Employees secured a general wage increase of 38pc spread out over four years and a $12,000 ratification bonus, along with other retirement and health care benefits. All workers must return to their positions by 12 November but can return as early as Wednesday, the union said. By Alex Nicoll Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US railroad-labor contract talks heat up


24/11/04
24/11/04

US railroad-labor contract talks heat up

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