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Shanxi is one of the key regions being targeted amid China’s plan to reach peak carbon emissions by 2030 and carbon neutrality by 2060, because it is a major source of steel, coal and carbon emissions, market participants have said.
A notice released by Shanxi’s Department of Industry and Information Technology on April 6 detailed how the northern Chinese province will promote the transformation and upgrading of its steel industry to achieve high-end and green steel production, to reduce the carbon emissions as well as maintain the competitiveness of its steel products.
Hydrogen metallurgy
Shanxi is encouraging hydrogen-based metallurgy, with hydrogen power believed to be an important part of China’s future energy system amid the country’s move to “green, low-carbon development” as well as the development of “emerging industries of strategic importance,” according to an official from the National Development and Reform Commission’s Department of Innovation and High-Tech Development.
Market participants say this would be feasible for the province because it is rich in coal and iron ore resources.
“Most of hydrogen in the country comes from coal – a large amount of hydrogen is produced in the coking process of coal. As a coal-rich province, Shanxi has a natural advantage in hydrogen production costs,” an official from Shanxi’s Department of Industry and Information Technology said in a statement about hydrogen development in the province, published in December 2022.
Coke oven gas, a by-product of coke production, has a hydrogen content of approximately 60%, from which 14 billion cubic meters of hydrogen can be extracted per year in Shanxi, the official added.
In September last year, Shanxi Jincheng Steel Holding Group (Jingang Group) tested the injecting of hydrogen-rich gas into one of its sintering projects and successfully met production requirements, while a second facility finished heating testing last month.
Compared with the conventional process, hydrogen-rich sintering can reduce the consumption of solid fuel by 0.9-1.3 kg in the production of a tonne of sintered ore, according to Jingang Group. After Jingang Group puts four hydrogen-rich sintering machines into operation, its consumption of solid fuel will be reduced by about 15,000 tonnes a year, while carbon dioxide emissions will decrease by about 40,000 tonnes.
In December 2022, Zhongjin Metallurgical Technology (Zhongjin), another major steelmaker in Shanxi, had a 300,000-tonne-per-year hydrogen-based direct reduced iron (DRI) project put into trial operation. With 100% coke oven gas as the fuel source, the project can produce DRI with a high Fe grade of above 92% and the DRI can be used in surrounding mills’ electric-arc furnaces (EAFs).
The hydrogen-based shaft furnace DRI project can reduce CO2 emissions by more than 50% and energy consumption by more than 20%, compared with the hydrogen-rich reduction blast furnace (BF), according to Zhongjin.
Advanced facilities
Shanxi will also add bigger and more advanced steelmaking facilities to replace BFs with a volume below 1,200 cubic meters, basic oxygen furnaces (BOF) and EAFs under 100 tonnes and ferro-alloy EAFs under 50 tonnes, aiming to have advanced steelmaking facilities account for more than 90% of total capacity by 2025.
More advanced and bigger steel-making facilities means higher requirements of raw materials and lower carbon emissions
“More advanced and bigger steel-making facilities means higher requirements of raw materials and lower carbon emissions,” an industry analyst said.
For instance, a large BF requires higher coke strength after reaction to make sure coke will not break into breeze when it falls from the top of the furnace to the bottom. The less coke breeze (fine coke), the higher efficiency of the utilization of raw materials in furnaces, market sources said.
BFs with a volume below 1,200 cubic meters make up 42% of the total molten iron capacity in Shanxi, according to a local industry information provider.
That means demand for high-strength coke will likely increase rapidly in the next few years, sources said.
“Coking plants should raise the quality of coke accordingly after the new, big BFs are set up,” the industry analyst said.
Shifting steel products, structure Shanxi plans to increase the proportion of non-construction steel products by 3 percentage points in 2023.
Steel mills are encouraged to speed up the research and development of high-end non-construction steel, including stainless steel, oriented silicon steel, thin cold-rolled flat steel and special bar and wire.
This change in steel product structure is in line with the province’s plan to revitalize the industrial equipment manufacturing industry, market sources said.
Shanxi aims to raise the revenue of the industrial equipment manufacturing industry by 12% year on year to 430 billion yuan ($63 billion) in 2023, according to a 2023 action plan released on April 12 by the Department of Industry and Information Technology.
The industrial equipment manufacturing industry comprises such sectors as metallurgy, transportation, electrical machinery, communication, computer and other electronic technology, instrument and office machinery, according to the notice.
A second 2023 action plan for the high-end equipment manufacturing industry released on April 11 said the total revenue of the high-end equipment manufacturing industry (rail transit, coal machinery equipment and engineering machinery) would exceed 88 billion yuan by the end of 2023, compared with 75 billion yuan in 2022.
“Shanxi province is trying to contain the crude steel production and carbon emissions by raising high-end steel output but reducing common steel output. Steel mills can adopt advanced production processes, such as hydrogen metallurgy to produce high-end green steel because users of high-end steel are more willing to accept green steel premium than users of common steel,” a trader source in northern China said.
“The approach of jointly improving the quality of steel production and demand is worth being learned by other regions. Local governments find consumers of high-end steel for steel mills, so that steel mills are willing to invest in high-end steel,” a second industry analyst said.
Raising the proportion of non-construction steel may cause the output of construction steel to drop, but market participants didn’t concern too much about the potential output reduction of construction steel in Shanxi because the housing market is still on a downward trend.
“The supply of construction steel is sufficient even though it may drop, and Shanxi’s construction steel is rarely sold to regions outside of the province,” a second trader source in northern China said.
Shanxi, top coal source and major steel-producing province in ChinaShanxi produced 1.31 billion tonnes of raw coal in 2022, accounting for 29% of China’s total output of 4.56 billion tonnes, according to figures from the National Bureau of Statistics (NBS).
Shanxi’s production of coke was 98 million tonnes in 2022, making up 21% of the country’s total output of 473.44 million tonnes.
Crude steel production in Shanxi totaled 64.23 million tonnes last year, representing 6% of the total output of 1.01 billion tonnes in the country, NBS figures show.
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- [Editor:kangmingfei]
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