“The shift of steelmaking process from blast furnace and converter route to EAFs will be a long-term trend in China’s path to carbon neutrality, as EAFs consuming mostly ferrous scrap have much lower carbon emissions and other low- or zero-carbon steelmaking technologies are not yet mature,” one mill source said.

          While large steelmakers such as flat steel producers will remain focused on blast furnace and converter routes, smaller mills, especially long steelmakers, are expected to gradually shift to EAFs, some sources said.

          China plans to boost EAF steel to account for 15%-20% of the total crude steel output by 2025.

          Eventually, 50% of China’s total crude steel capacity could come from EAFs in order to minimize carbon emissions, some sources said.

          China has vowed to become carbon neutral by 2060 and plans to hit peak carbon emissions by 2030.

          China’s steel industry, accounting for around 15% of national carbon emissions, is expected to move faster towards carbon neutrality.

          According to the China Association of Metal scrap Utilization, China’s crude steel made by EAFs over January-November 2021 accounted for 10.86% of the country’s total crude steel output, or 102.77 million mt, up from the ratio of 10.12% seen in the same period of 2020.

          The shift from blast furnace and converter route to EAFs is expected to gain pace once steelmakers start incurring carbon emission charges.

          While a timeline for when the steel industry will start paying for carbon emissions remains unclear so far, some industry sources expected this could happen within the next decade.

          According to Baowu Group, if China’s carbon prices increase to Eur60/mt ($71/mt) and carbon trading is extensively imposed in the steel industry, Chinese producers could see a sharp 40% rise in production costs for hot-rolled coil through blast furnace and converter route.

-- Steel Business Briefing