China looks set to miss its target set by the end of last year to boost production of cleaner steel, as the use of newer, cleaner furnaces has slowed due to a property crisis that has weighed on demand and prices.
China is the world’s biggest polluter and steel producer, and efforts to clean up production are part of an ambitious strategy to meet climate targets, even as authorities seek to support the economy in the face of a slowdown. For steel, authorities have set a target for electric furnaces to account for more than 15% of total output by the end of 2025.
However, the average utilization rate of these furnaces — which remelt old steel and avoid using coal — was 49% last year, down from 54% in 2023, according to Shanghai-based data firm Fubao Information, which based its study on more than 100 mills. This is the lowest rate since records began in 2021.
“The 15% target will definitely not be met,” said Xu Xiangchun, an analyst at Maesteel Global. “There is enough capacity in electric arc furnaces to reach this target, but the decline in sales and prices has led to a reduction in production, as these furnaces mainly produce steel used in construction, which has been severely affected.”
China’s property crisis is one of the toughest economic challenges facing the country, with falling home prices amid a glut of unsold units, a major drag on demand for steel, weighing on prices and raising concerns among major producers.
The World Steel Association said electric arc furnaces accounted for 9.9% of China’s total production in 2023, and Florence Sun, a strategist at Macquarie Group, said last year’s figure was “slightly lower” than that, adding that achieving the target this year was too ambitious.
Electric arc furnaces are a less polluting way to produce steel than traditional coal-fired furnaces, which have long dominated China’s steelmaking industry, which accounts for 7% of global carbon dioxide emissions. Still, some analysts have predicted progress toward the target, with Jiang Mingtian, an analyst at Horizon Insights, saying he expects an improvement through 2025, citing factors including China’s decarbonization targets.