(Bloomberg) -- China will again cut annual crude steel production in 2023, according to a person familiar with the decision, marking the third year in a row that the government has mandated reduced output in order to rein in carbon emissions from the heavily polluting sector.
China is the world’s biggest producer and consumer of the alloy, which is the backbone of its industrial economy. Since output hit a record of 1.053 billion tons in 2020, it has declined each year to remain just above 1 billion tons. The sector accounts for about 15% of national emissions, second only to electricity generation.
As part of the plan, the government will also ban new steelmaking capacity, the person said, declining to be named when discussing policy. China’s economic planning agency, the National Development and Reform Commission, didn’t immediately respond to a request for comment.
The industry has been set a goal of peaking emissions by 2030 — the same deadline as the economy as a whole — although if production continues to fall for the rest of the decade that target would have already been met. While Beijing continues to employ large-scale stimulus to buttress economic growth, the proportion of steel used is declining as the economy transitions to less-metals intensive infrastructure. The government’s crackdown on the property market has also sapped demand for the alloy.
Some of the world’s biggest miners, from BHP Group in Australia to Vale SA in Brazil, rely on China’s steel mills to consume the vast quantities of iron ore they produce, so less demand is likely to weigh on their earnings. Both BHP and rival miner Rio Tinto Plc fell 1.1% in London.
Chinese steel production climbed 5.6% in the first two months of the year to 169 million tons, although Beijing’s relatively modest targets for growth in 2023, unveiled at its annual legislative meeting earlier in March, have dented expectations of a big increase in demand.
(Updates with share moves in penultimate paragraph)
©2023 Bloomberg L.P.
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