How is "green" steel made?

In combination with the status quo that China's steel industry still has backward production capacity, the Ministry of Industry and Information Technology issued the "Guiding Opinions on Promoting the High-quality Development of the Steel Industry (Draft for Comments)", which made strict and specific provisions on the control of the steel industry production capacity, including prohibiting new steel production capacity, strictly implementing the relevant provisions such as steel production capacity replacement and project filing, and prohibiting the construction and expansion of smelting capacity projects; Zombie capacity should be disposed of according to classification, and the capacity of "zombie enterprises" that have not been restructured or liquidated shall not be used for capacity replacement; Strengthen the investigation and punishment of illegal new steel production capacity, continue to maintain a high-pressure crackdown, and consolidate the results of steel production capacity.

In January 2021, the Ministry of Industry and Information Technology clearly proposed at a press conference that reducing steel production is an important measure to achieve "double carbon", and once again stressed that it will resolutely compress steel production by prohibiting new steel capacity, improving capacity replacement methods, and promoting mergers and acquisitions in the steel industry.

Market regulation: increase concentration and form leading enterprises to regulate output

In addition to administrative measures, it is equally important to regulate production capacity and output through market-oriented means, but the prerequisite is the existence of large-scale enterprises that can lead the whole industry.

Taking the United States as an example, the United States steel has achieved control over the output and price of the entire steel market by constantly increasing its market share, but also lost market control in the process of declining market share.

The year 1901

Carnegie, Federal Steel, National Steel, Shelby steel and other producers and iron ore companies combined to form the United States Steel, the market share reached 66%, can effectively control the entire United States steel industry output and prices;

The year 1930

Under the leadership of the price mechanism, the rapid expansion of other steel mills led to the market share of US steel falling to about 40%, and the price leadership began to decline. During the Great Depression from 1929 to 1932, the US steel industry had excess capacity, and some steel mills began to no longer comply with the price leadership of US steel.

The year 1940

Due to slow improvement in production efficiency, upward labor costs and other factors, the U.S. steel market share further declined, and eventually gave up price leadership, it is difficult to produce a strong control of output and prices in the entire industry.

And China's steel industry CR10 in 2020 is only 39.2%, far lower than the United States, Russia, India and other major steel producing countries, the concentration is too low caused by industry expansion, relatively disorderly production, weak bargaining power and other problems, so whether it is to achieve the "double carbon" goal through the control of production capacity and output, or for the benign development of the entire industry, China's steel industry concentration must be greatly improved.

At present, China's steel industry policy has begun to vigorously promote the industry concentration, the current Baowu steel and other large steel enterprises have opened a large-scale merger and reorganization, it is expected that the future concentration of China's steel industry will show an upward trend.

Process transformation: Drive the transformation of long process to short process in the long term

From the production process level, promoting the transformation of long processes to short processes is another important measure for the industry to reduce carbon, but it is difficult to achieve complete replacement in the short term. Although the carbon emission per ton of steel in the short process is much lower than that in the long process, the urbanization in the short term will increase the demand for steel, the shortage of raw materials, and the high cost decide that the process transformation will be a long-term process.

In terms of demand, China's current urbanization rate still has room to improve, and steel demand is expected to rise further in the short term. From the data of the three developed countries of the United States, Japan and France, it can be found that before the urbanization rate reached 75%, the increase of the urbanization rate had a greater role in promoting the demand for crude steel, and after reaching 75%, the pulling effect began to slow down, and the crude steel production entered the plateau period. In 2019, China's urbanization rate is about 61.5%, and it is expected that there is still a large demand for steel, so it is difficult to promote short processes to replace long processes on a large scale in the short term.