As per clean energy experts, China’s steel industry must reduce its capacity by 15% this year to align with its 2025 climate goals and restore profitability.
The Centre for Research on Energy and Clean Air (CREA) noted that China needs to cut at least 200 million tons of blast furnace capacity from its 2020 levels, a scale comparable to the entire steel industry of the European Union, with an additional reduction of 150 million tons necessary by the end of the decade, in order to get back on course.
Although the Chinese government has attempted to curb production by mentioning issues with emissions, the output remains excessively high, surpassing one billion tons annually for five consecutive years by 2024. Emissions from the steel sector accounted for around 17% of the nation’s outflows, with the sector remaining overly dependent on coal.
The downturn in steel prices has squeezed profits, leaving many producers in the red for much of the previous year. However, this overcapacity is not solely a domestic issue, as China’s steel exports reached a nine-year peak in 2024, exacerbating international trade disputes.
The CREA suggests that resolving both environmental and production challenges requires a substantial reduction in reliance on traditional blast furnaces and a quick transition to greener technologies, including electric arc furnaces (EAF) and green hydrogen.
Currently, EAF steel production in China comprises less than 10% of total output, below the government’s 2025 target of 15%.
