China sets carbon reduction plans for steel, aluminium

The Chinese government has laid out action plans to accelerate energy conservation and carbon reduction in some key industrial sectors that are considered energy- and emissions-intensive, including steel and aluminium.

The country will formulate energy efficiency reference and benchmark levels for these sectors during 2021-2025, and aims to have more than 30pc of its domestic steel and aluminium capacity qualify for the benchmark levels by 2025.

The action plans support the country's goal of reaching peak carbon emissions before 2030 and achieving carbon neutrality by 2060, and are in line with Beijing's commitment to curb blind development of energy- and emissions-intensive projects.

The energy efficiency benchmark levels for the steel industry are 361kg of standard coal for one tonne of steel produced by the blast furnace process and -30kg of standard coal for one tonne of steel produced by the converter process. The benchmark level for aluminium will be 13,000 kWh/t. The plans also cover cement and plate glass.

The government will take measures and provide support to encourage producers to upgrade to production techniques that will reduce their energy consumption and carbon emissions, and allow inefficient and backward production capacity to be phased out in the next five years. It will also encourage the producers to develop green and low-carbon technologies and products such as high-quality, high-strength and long-life steel and aluminium products, through innovations.

The government will also conscientiously implement a multi-step electricity price mechanism for the aluminium industry and improve the green electricity mechanism for the steel, cement and plate glass industries, to curb excessive production and blind development of energy- and emissions-intensive projects.

China has intensified restrictions on energy consumption in the last few months to meet its carbon emission reduction targets. This has bolstered prices for bulk commodities, including many metals, to fresh highs over the past decade.

Chinese magnesium metal export prices hit record highs of $10,000-10,600/t fob China in late September, the highest since this assessment was launched by Argus. Domestic prices for 5-5-3 grade silicon metal were assessed by Argus at a 15-year high of Yn57,500-58,000/t on 28 September.

The country's key aluminium producer Yunnan Aluminium has reduced its output by around 770,000t since May because of electricity supply shortages after the government imposed an energy consumption control policy. The combined production of major smelters in the province, including Yunnan Aluminium, Yunnan Shenhuo Aluminium, Yunnan Hongtai New Materials and Yunnan Qiya Metal, is expected to fall to 3.21mn t this year compared with their total capacity of 4.48mn t/yr.

Beijing also aims to keep the country's 2021 steel output flat with 2020 levels, with state-owned mills having been ordered to cut steel output and exports, and with provinces also directing mills to keep output flat. China's crude steel output in September fell to the lowest level since December 2017, with an output of 73.75mn t in the month falling by 11.4pc from August and by 21.2pc on the year, the National Bureau of Statistics (NBS) said.