Steel sector undergoing structural adjustments

China's steel companies are increasingly embracing greener and higher-quality practices, driven by the rapidly growing demand for low-carbon products from downstream industries like electric vehicles, said experts.

The shift is also propelled by increased global demand for lower carbon footprints, exemplified by the impending inclusion of the steel industry in China's carbon market and the European Union's Carbon Border Adjustment Mechanism.

"As the steel industry gears up to enter the domestic carbon trading market, there will be growing demand for environmentally friendly steel products in the near future to avoid extra payment charged from emissions. The move also helps steel companies to better integrate into the global market as more economies are starting to place a price on emissions," Guan Zhijie, deputy chief engineer of the China Metallurgical Industry Planning and Research Institute, said.

Despite the accompanying cost increases for green production, Xiao Bangguo, deputy head of the institute, emphasizes the necessity for steel enterprises to navigate through uncertainties in both domestic and global economic spheres. "By elevating product standards and refining operational strategies, these enterprises can fortify their competitive edge," Xiao said.

Currently, the steel sector is undergoing structural adjustments, with a clear shift toward environmentally friendly and high-quality transformations. A recent report by the institute highlights a rise in steel consumption in sectors such as machinery, automobiles, energy and shipbuilding this year, while industries like construction and railways are experiencing a decline.

This trend is projected to continue into next year, with a potential decrease in steel usage in segments like containers and hardware, which saw a growth in steel use this year, said the institute.

The progress of high-tech industries may also drive demand for premium steel products.

"To address the evolving requirements of downstream industries such as aerospace, marine equipment, new energy and electric vehicles, steel companies need to ramp up supply of high-end products, accelerating improvements in product stability and reliability," said Guan.

The institute said that China's steel demand may see a slight decrease of 1.5 percent to 850 million metric tons next year.

In 2025, supported by trade-in policies, the automotive sector is expected to maintain its growth momentum, with an estimated steel demand of about 59.8 million tons, representing a 4 percent yearly increase.

The institute's projections suggest that in 2025, the energy industry's steel demand will reach approximately 49.5 million tons, a 1.9 percent year-on-year increase. The shipbuilding sector is expected to use around 16.7 million tons of steel, a 5.7 percent yearly growth.

With policy incentives designed to boost consumption and facilitate the trade-in program, it is expected that in 2025, steel demand in China's home appliance sector will grow 8.4 percent to 19.4 million tons.