Unlocking the First Wave of Breakthrough Steel Investments in China

Investment Rating - The report does not explicitly provide an investment rating for the steel industry in China Core Insights - The transition to low-carbon and near-zero-carbon steel production is essential for meeting global climate goals and presents opportunities for high-quality development in the steel industry and its downstream partners [29][30] - The report emphasizes the need for accelerated deployment of near-zero-carbon steel projects to avoid locking in carbon emissions through the continued use of existing equipment [32][41] - The study highlights the importance of economic assessments at the project level to address the financial challenges associated with transitioning to low-carbon technologies [34][36] Summary by Sections 1. China's Steel Industry under the Carbon Neutrality Goal - China's steel industry is a major contributor to global emissions, with direct emissions accounting for approximately 14% of the country's total [38] - The industry is heavily reliant on coal, which constitutes 76% of its energy use, compared to lower percentages in Europe and the United States [39] - The report outlines the potential for increasing the share of short-process production, which currently accounts for less than 10% of total production, as urbanization and industrialization progress [40][43] 2. Economics and Transition Costs - The report categorizes steel production routes into long process, short process, and direct reduction, with varying emissions and economic implications [61][62] - The cost of producing steel through different routes varies significantly, with the BF-BOF method costing about 3,200 RMB/ton, while the cost for H2 DRI-EAF could reach around 4,100 RMB/ton as green hydrogen becomes more integrated [90][92] - The transition from higher-carbon to lower-carbon production routes is a gradual process that requires careful consideration of existing facilities and resources [97] 3. Integrated Solutions to Solve the Cost Puzzle - The report discusses the roles of policy, demand-side, and financial stakeholders in supporting the transition of the steel industry [23] - It emphasizes the need for a comprehensive solution that enhances project profitability and sustainability through various supporting levers, including green hydrogen subsidies and carbon markets [36] 4. Recommendations - The report presents six action recommendations aimed at mobilizing stakeholders to create favorable conditions for the deployment of near-zero-carbon steel projects [36]