China attributes production decline to carbon neutrality policy
Production decreases due to power shortages, raw material price surges, and real estate market contraction
[Asia Economy Beijing=Special Correspondent Jo Young-shin] China’s crude steel production has sharply declined. It appears to be due to reductions caused by power restrictions.
According to Chinese media including the state-run Xinhua News Agency on the 26th, China’s daily crude steel production in September was 2,458,300 tons. This represents an 8.45% decrease from the previous month and a drastic 21.2% drop compared to the same month last year.
Xinhua cited data from the China Iron and Steel Association, reporting that daily crude steel production in September fell by 24.6% compared to the peak in April.
The China Iron and Steel Association noted that September’s production was the lowest in the past three years, attributing this to the policy outcome of carbon neutrality. It also emphasized that nationwide crude steel production in the first, second, and third quarters decreased by 16%, 8%, and 15% respectively compared to the same periods last year.
As crude steel production declined, iron ore imports also decreased. Iron ore imports in September were 842 million tons, down 3% year-on-year. Iron ore prices, which once exceeded $200 per ton, are currently trading at around $120 per ton.
With the decline in crude steel production, exports also shifted to a downward trend. Exports of Chinese steel products decreased for three consecutive months from July to September. However, exports of Chinese steel products from January to September increased by 31.3% compared to the previous year.
Qi Xuli, Vice Chairman of the China Iron and Steel Association, explained, "Although the Chinese economy is generally maintaining a recovery trend, uncertainties both domestically and internationally remain. Next year’s steel consumption in China may change depending on government policies, but overall it is expected to be similar to this year."
Chinese media analyze that crude steel production is decreasing due to the Chinese government’s environmental policies such as carbon neutrality. However, the direct causes of the decline in crude steel production appear to be production restrictions due to power shortages, a sharp rise in international coal prices, and reduced steel consumption caused by the real estate market contraction.
After banning imports of Australian iron ore and seeing international iron ore prices soar, China took emergency measures in the first half of this year, applying a '0%' import tariff on some steel products and raw materials. Conversely, it imposed export taxes of up to 25% on certain steel products such as high-purity pig iron, making an all-out effort to stabilize its domestic steel industry.
Meanwhile, Huanqiu Shibao reported on the same day, citing data from China’s National Energy Administration, that the share of coal-fired power generation in China recently fell to 50%. The share of coal-fired power generation in China was 65.7% in 2012.
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