What are the carbon reduction methods for the domestic steel industry?

 　　Firstly, deepen structural reform and convert blast furnaces into electric furnaces. As of 2021, China's crude steel production reached 10.33 billion tons, accounting for 54% of global production. Among them, the crude steel production of electric furnaces is 1.09 billion tons, accounting for only 19.4% of the global crude steel production of electric furnaces, while the steelmaking ratio of electric furnaces in China is only 10.58%, far lower than the average level of countries in North America and Europe, and even lower than the level of Africa. In addition, from the trend of changes in the domestic crude steel production structure, it can be seen that at the beginning of 2020, due to the continuous increase in blast furnace steelmaking output, the proportion of electric furnace steelmaking continued to decline, and remained low from 2013 to 2016. Since the start of supply side structural reform in 2016, the proportion of electric furnace steelmaking gradually rebounded, and then remained around 10%. It is worth noting that in 2021, the crude steel production of electric furnaces has increased, while the steel production of blast furnaces has decreased, reflecting to some extent that the current structural reform of the steel industry has achieved initial results.

　　At the beginning of 2023, the World Iron and Steel Association released the Sustainable Development Indicators Report (2022 Edition), which uses 8 indicators to measure the environmental performance of the global steel industry in the 2021 fiscal year. In the fiscal year 2021, the carbon dioxide emission intensity of the steel industry was 1.91 tons of carbon dioxide per ton of steel. In addition, the report also compares the environmental performance of different production processes. Among them, the environmental performance of Scrap EAF method based on scrap steel is 0.67 tons of carbon dioxide/ton of steel, the environmental performance of BF BOF method is 2.32 tons of carbon dioxide/ton of steel, and the environmental performance of DRI-EAF method is 1.65 tons of carbon dioxide/ton of steel.

　　It can be seen that the carbon dioxide emissions from the blast furnace converter steelmaking method are much higher than those from the arc furnace steelmaking method of scrap steel. If calculated according to international average standards, ignoring the proportion of direct reduced iron production in China, due to the large proportion of long-term blast furnace steelmaking in China, the carbon emissions per ton of steel are close to 2.1454 tons (0.67 tons) × 0.1058+2.32 × 0.8942) is much greater than the international average of 1.91 tons. Therefore, deepening the structure of the steel industry and increasing the proportion of short process production is one of the important means to effectively reduce carbon emissions. The Guiding Opinions point out that one of the main tasks for the high-quality development of the steel industry is to orderly develop electric furnace steelmaking, encourage conditional long process blast furnace converter enterprises to transform and develop electric furnace short process steelmaking, and strive to achieve electric furnace steel production accounting for more than 15% of the total crude steel production by 2025. At the same time, the utilization of scrap steel resources in the steel industry will reach 300 million tons. Within 4 years, a proportion transformation of 10.58% to 15% and a utilization of 300 million tons of scrap steel resources will be completed, indicating a trend of upgrading smelting equipment in China. The replacement of blast furnace converter with scrap steel electric furnace will be the trend. According to statistics, the utilization rate of scrap steel resources in steelmaking has dropped to 72.92%, mainly due to an increase in overall resource supply and a decrease in electric furnace smelting.

　　At present, the cost and profit situation of electric furnace steelmaking are still important factors restricting the rapid development of short process in China, with short process profits consistently lower than long process profits. From the end of 2021 to the second half of 2022, electric furnace steelmaking has been experiencing long-term negative profits, but since November 2022, the profit gap between the long and short processes has significantly narrowed. However, from the overall trend, in the context of the increasing supply of depreciated scrap steel and high import iron ore prices, seeking breakthroughs in short process electric furnace steelmaking may alleviate steel mill losses while significantly reducing carbon dioxide emissions.

　　Secondly, production reduction and crude steel production restriction. There is a strong correlation between industrial carbon emissions and crude steel production. Therefore, in addition to strengthening the deep adjustment of the steel industry structure, limiting the production of crude steel is still one of the most direct and effective regulatory measures to some extent.

　　In 2014, China's crude steel production reached a peak of 823 million tons, an increase of 5.47 times compared to 2000. In 2015, due to macroeconomic impact, steel production capacity was surplus and prices were competitive, resulting in a decrease in prices. Crude steel production fell to 804 million tons, but still accounted for 49.61% of the global total. At the same time, as of 2015, China's apparent consumption of iron ore reached 1.077 billion tons, accounting for 54.97%, making it the world's largest consumer of iron ore.

　　On February 1, 2016, the State Council issued the "Opinions on Resolving Excess Capacity in the Steel Industry and Realizing Poverty Alleviation and Development", proposing to reduce excess capacity by 100-150 million tons over a period of five years. The government has closely implemented policies to reduce production capacity, and various regions have strictly reduced production capacity. In 2016, the steel industry lost 65 million tons of production capacity, causing steel companies to turn from losses to profits, and the industry emerged from a downturn. In 2017, the industry completed its capacity reduction plan ahead of schedule, reducing production capacity by 55 million tons. With the effective elimination of outdated steel production capacity and the improvement of production efficiency and steel quality through the supply side structural reform, the supply-demand contradiction has been significantly improved, the number of enterprises has decreased, and the profit margin has significantly increased. The crude steel production has also broken through from 2017 to 832 million tons, and has continued to grow to a peak of 1.053 billion tons in 2020.

　　In 2021 and 2022, driven by the "dual carbon" policy, crude steel production began to decline. As of 2022, the cumulative production of crude steel is still as high as 1.013 billion tons. According to the international average standard, the carbon emissions of 2.15 tons/ton of crude steel are further estimated, and the carbon emissions of China's steel industry in 2022 are as high as 2.178 billion tons. The production of crude steel may still need further reduction.

　　In 2020, since the "14th Five Year Plan" proposed carbon peaking and carbon neutrality, the Ministry of Industry and Information Technology at the end of 2019 highlighted the implementation of industrial low-carbon action and green manufacturing projects around the target nodes of carbon peaking and carbon neutrality. As an energy intensive industry, the iron and steel industry should resolutely reduce crude steel output to ensure that crude steel output declined year-on-year.

　　Since July 2021, the monthly production of crude steel has significantly decreased year-on-year, with a year-on-year decrease from 8.4% to 23.3%, continuing until September 2022. The base effect has led to a year-on-year recovery. However, from a cumulative perspective, the cumulative production of crude steel has shown a sustained year-on-year decline since October 2021. The reason for this is that, in addition to the policy of restricting crude steel production since the first half of 2021, it is more likely that the poor real estate economic activity has led to a significant decrease in terminal steel consumption. Although the real estate economic activity data rebounded at the beginning of 2023, there was still a year-on-year decrease. Based on a series of long-term macro backgrounds such as the domestic population and changes in financing environment, the real estate terminal demand, which accounts for over 40% of steel demand, may have peaked, and the trend of gradual decline in crude steel production will continue for a long time, which will be conducive to achieving the "dual carbon" goal.

　　Thirdly, energy conservation, emission reduction, and technological upgrading. According to data released by the China Iron and Steel Association, as of August 25, 2022, there have been 172 million tons of steel production capacity in China that have completed the entire process of ultra-low emission transformation and have passed the evaluation, testing and public announcement of the Steel Association. The main transformation project has completed nearly 400 million tons of steel production capacity, and the cumulative investment in ultra-low emission transformation of steel enterprises nationwide has exceeded 150 billion yuan. According to the calculation of 1 billion tons of steel and an average capacity utilization rate of 85%, the domestic production capacity is about 1.15 billion tons. If more than 80% of the steel production capacity is transformed into ultra-low emissions according to the "Guiding Opinions" by 2025, the industry will need to complete nearly 500 million tons of steel production capacity transformation projects by 2025, with an additional investment of not less than 150 billion yuan.

　　As of the end of 2020, about 4% of China's steel industry's blast furnace production capacity had energy efficiency better than the benchmark level, and about 30% had energy efficiency lower than the benchmark level; The production capacity of the converter process with energy efficiency better than the benchmark level accounts for about 6%, and the production capacity with energy efficiency lower than the benchmark level accounts for about 30%. According to the Implementation Guidelines for Energy Conservation and Carbon Reduction Transformation and Upgrading in the Steel Industry, by 2025, the proportion of production capacity above the energy efficiency benchmark level in the ironmaking and steelmaking processes in the steel industry will reach 30%, and production capacity below the energy efficiency benchmark level will be basically zero. In terms of work direction, it mainly includes two aspects: advanced technology research and promotion of mature processes. In the field of advanced technology research, the focus will be on low-carbon cutting-edge technologies such as direct reduction of by-product coke oven gas or natural gas for ironmaking, high oxygen or hydrogen rich smelting in blast furnaces, melt reduction, and hydrogen smelting, to increase the recycling and utilization of scrap steel resources. In terms of mature processes, it can be summarized into four aspects: firstly, advanced green production processes, including detailed optimization technology for long processes, green, intelligent, and efficient electric furnace short process steelmaking technology, and upgrading of advanced process equipment; The second is the cascade comprehensive utilization of waste heat and energy, which achieves the maximum recovery and utilization of waste heat and energy resources through cascade comprehensive utilization; The third is the digitization and intelligence of energy and energy efficiency management systems, promoting the innovative application of new generation information technologies such as 5G, big data, artificial intelligence, cloud computing, and the Internet in energy management; The fourth is the transformation of general public and auxiliary facilities and circular low-carbon economy, strengthening energy conservation and electricity consumption while improving the utilization level of other types of resources.

　　According to the requirements of the "Guiding Opinions", the comprehensive energy consumption target for per ton of steel in 2025 is only to reduce by 2%, which to some extent reflects the relatively effective effect of energy conservation and emission reduction in reducing carbon emissions. More importantly, technology is still used to promote structural transformation and quantitative reduction.

　　Based on the carbon reduction path mentioned above, the carbon emissions from the ferrous metal smelting and rolling processing industry account for about 40% of the total industrial emissions. According to historical data, there is a significant correlation between the year-on-year changes in crude steel production in the steel industry and the year-on-year changes in industrial carbon emissions. Meanwhile, crude steel production peaked in 2020, and in October 2021, when the cumulative year-on-year decline in crude steel began, industrial carbon emissions followed suit and began to decline year-on-year. At present, the carbon emissions of the steel industry may have reached a peak and are beginning to shift towards sustained reduction. On the one hand, in deepening the structural reform of the steel industry, if the proportion of short processes increases from 10% to 15% by 2025, nearly 50 million tons of crude steel will be converted from long processes to short processes, which will be reduced by nearly [(2.32-0.67) according to international average standards × 5000/10000]=0.825 billion tons of carbon dioxide emissions. On the other hand, with the continuous promotion of energy conservation, emission reduction, and technological upgrading, from long to short processes to future full hydrogen reduction of iron, technological equipment will continue to be upgraded to promote capacity conversion and reduce carbon emissions.