China output cut pledge to create supply shortages

China has pledged to cut its crude steel output in 2021 from a record 1.06 billion tons it produced in the previous year to reduce carbon emissions even as it imposed curbs on steel production in Tangshan region over environmental concerns as many steel plants were found to be not sticking to pollution control rules.

Steel Insights Bureau

The steel sector accounts for close to 15 percent of China’s total emissions, highest among industrial sectors.

The March annual plenary session of the National People’s Congress announced new targets for achieving carbon neutralisation to be achieved through reducing energy consumption and carbon dioxide emissions per unit of GDP respectively by 13.5 percent and 18 percent during 2021-25 period.

The development comes at a time when steel futures in China touched highest level in a decade as sharp recovery in seasonal demand post New Year break became apparent.

However, there are uncertainties over production growth, following recent announcements of output restrictions in Tangshan.

China’s Ministry of Ecology and Environment (MEE) earlier urged industrial units in Tangshan, a key steel making region, to crack down on violations of environment rules.

The ministry also asked local government to eliminate outdated capacity.

The local Tangshan government issued second-level pollution alert in March urging steel and coking plants to cut production.