In sync with its ‘dual carbon’ goal of peaking emissions by 2030 and attaining carbon neutrality by 2060, the Chinese steel industry is expected to reduce consumption of coking coal by 20-25% by 2030, reports indicate. It is predicted that the share of scrap-based EAFs in China’s total crude steel production will rise to 22% by 2030 from 12% at present. Out of 1.01 billion tonnes (bnt) of steel produced in China in 2022, 88% was churned out through the BF-BOF route.
In 2022, China’s coking coal production stood at 676 mnt, while another 64 mnt was imported. Due to the heavy reliance on the coal-based BF-BOF route, steel production accounts for about 20% of the country’s total annual carbon emissions. Thus, it is a key target in the government’s efforts to curb carbon emissions and improve air quality.
Why might coking coal consumption fall?
*Steel production to drop: It is expected that steel production in China has almost plateaued. Many experts reckon that the 1.059 bnt of crude steel production in 2020 represented the peak. In 2022, crude steel production fell by 2% y-o-y. It is projected that crude steel production will drop to around 850 mnt by 2030.
*Scrap/DRI share in steelmaking to rise: Higher steel scrap usage expectations could eat into coking coal demand. The National Development and Reform Commission (NDRC) sees China’s 2025 steel scrap usage rising to 320 mnt on carbon neutrality goals. The scrap ratio in steelmaking is expected to increase to 34% by 2030.
*Hydrogen likely to replace PCI: Experts contend that reducing carbon emissions from blast furnaces will involve the replacement of PCI with hydrogen. China’s steel producers are likely to transition from PCI to coke oven gas (COG) first and then hydrogen. Therefore, overall coking coal demand will drop.
Outlook
Therefore, the long-term demand scenario for coking coal remains bearish, although it will take another decade or so before the final signs of decline become visible.
2nd Asia Coal Outlook & Trade Summit
Want to follow the discussion on how Chinese steelmakers are expected to cut coking coal consumption? Be a part of the discussion on technological breakthroughs in the Chinese steel industry at CoalMint’s 2nd Asia Coal Outlook & Trade Summit to be held at the Grand Hyatt Erawan in Bangkok, Thailand on 24-25 April, 2023.
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