China is looking to cut its steel production in a bid to reduce carbon emissions. Chinese steel producers release 10-20 percent of the country’s total carbon emissions. The country needs to fix this in order to meet its commitment to net-zero emissions by 2060.

However, experts feel it will be a gargantuan challenge.

In the first six months of 2021, Chinese steel producers have already produced 12 percent more crude steel than they did in the previous year in the same time period. Experts said it is now almost impossible for the country to not produce more steel than it did in the previous year.

“It would involve a real slamming on of the brakes to get that down. We think steel output will be up around 8-9 percent this year,” Paul Bartholomew, lead steel analyst at S&P Global Platts, told CNBC.

Steel production has been buoyed by prices of crude steel, which itself has risen due to the huge demand from the Chinese construction sector. While demand from this sector will taper in the second half of the year, prices and production are expected to stay high for some time.

While China can exert pressure on government-owned mills, it is hard to impose restrictions on production capacity, given the sheer number of steel units. Unless demand falls, the price of steel will rise because of the government mandate. This in turn will give the mills unaffected by government curbs the incentive to produce more.

“Importantly, mills have been making decent money for much of this year … and sentiment remains generally buoyant so the industry will want to take advantage of any profits on offer by producing plenty of steel,” Bartholomew added.

(Edited by : Shoma Bhattacharjee)

First Published:Aug 3, 2021 8:55 PM IST