In 2021, the steel industry implemented the output regulation policy for the first time, and achieved the goal of year-on-year decline in crude steel output. It is necessary to control the output of crude steel. This measure can curb the disorderly rise of iron ore prices and is an important link to achieve the goal of "double carbon". This year, the iron and steel industry will continue to regulate the output of crude steel, and the implementation of classified policies, the survival of the fittest, quality improvement and efficiency enhancement are still important principles for limiting production.


From capacity control to dual control of capacity and output


At the end of 2020, the Ministry of industry and information technology put forward the goal of "ensuring the year-on-year decline of crude steel output in 2021". Under the guidance of this goal, the steel industry will implement the crude steel output regulation policy for the first time in 2021. In the second half of 2021, with the implementation of production restriction measures, the growth of steel production was curbed. Since July, crude steel production has maintained a year-on-year decline for six consecutive months. According to the data, the cumulative crude steel output in 2021 was 1.033 billion tons, a year-on-year decrease of about 32 million tons, a decrease of 3%.


Zhang Longqiang, party secretary and President of Metallurgical Industry Information Standards Research Institute, said that during the 13th Five Year Plan period, the supply side structural reform of the iron and steel industry was continuously promoted and deepened. In the "14th five year plan" period, by issuing new steel capacity replacement methods and project filing guidance, we continued to regulate crude steel output, and the steel industry continued the policy of dual control from capacity control to capacity and output. Continuing to regulate crude steel output is an important measure for the iron and steel industry to further deepen the supply side structural reform.


With the normalization of the dual control policy of production capacity and output, domestic steel production has entered the peak platform area. The metallurgical industry planning and Research Institute predicts that the domestic steel output will fluctuate around 1 billion tons for a long time.


Curb the rapid rise of iron ore prices


Data show that in 2021, the accumulated profits of key large and medium-sized iron and steel enterprises totaled 352.4 billion yuan, a year-on-year increase of 59.7%, a record high.


The efficiency of the iron and steel industry stands at a new high point, which is closely related to output regulation. Li Xinchuang, vice president of China Iron and Steel Industry Association and party secretary of metallurgical industry planning and Research Institute, said that the improvement of the efficiency of the iron and steel industry is a successful practice of double control measures of production capacity and output. Output control helps to stabilize product prices and reduce the cost of raw materials, so as to improve the efficiency of the industry.


Iron ore is an important raw material for crude steel production, accounting for about 50% to 60% of the production cost. For a long time, the "expensive" of iron ore has been a major problem in the industry. Output control has played an important role in curbing the rapid rise of iron ore prices.


According to the data, in May 2021, the price of imported iron ore reached US $230.59 per ton, which completely deviated from the fundamentals of the industry. In July 2021, the reduction of crude steel output entered a substantive stage, and the price of imported iron ore fluctuated downward, falling to US $102.19 per ton by mid September, a decrease of 55.7%. With the reduction of crude steel pressure increasing month by month, the lowest price of imported iron ore fell to US $85.80 per ton in mid November 2021, and the decline further expanded to 62.8%. "The price of imported iron ore is highly correlated with the cumulative reduction of crude steel production." Zhang Longqiang said.


Regulating production capacity under the goal of "double carbon"


The guidance on promoting the high-quality development of the iron and steel industry issued by the Ministry of industry and information technology and other three departments proposes to strive to reduce the comprehensive energy consumption per ton of steel by more than 2% by 2025 and ensure the carbon peak by 2030. Under the "double carbon" goal, taking multiple measures to reduce carbon emissions has become a top priority, and output regulation is an important link.


Li Xinchuang said that output control is an important measure to promote the iron and steel industry to achieve the "double carbon" goal, which mainly depends on the characteristics of the iron and steel industry.


First of all, the steel industry has a large volume base, short time to achieve carbon peak and heavy task. Although the industry continues to promote energy conservation and consumption reduction, energy consumption, power consumption, carbon emissions and pollutant emissions are still large, accounting for 12%, 7%, 15% and 10% of the country respectively. Secondly, the technological process of the iron and steel industry is obviously high carbonization, and there are still obstacles to promote the optimization of technological process structure in the short term. The iron and steel industry is dominated by the long process structure of blast furnace converter, the space for energy consumption reduction is limited, greater energy conservation and carbon emission reduction are facing bottlenecks, and low-carbon technologies such as hydrogen metallurgy and CCUs do not have the conditions for large-scale application. Finally, the work of energy conservation and consumption reduction has been continuously promoted for many years, and the overall space for energy conservation and carbon reduction of steel enterprises has been shrinking.


Industry innovation measures


It is reported that the iron and steel industry will continue to carry out crude steel output regulation in 2022. In the specific implementation process, how to implement the principles of classified implementation and survival of the fittest is the focus of the industry.


Li Xinchuang said that the output regulation policy in 2021 has achieved remarkable results, but some regions are slightly "simple and rough" in the specific implementation process. In the process of limiting production, some short process enterprises are "given priority" to limit production due to factors such as easy stop and small loss, which is contrary to the principle of "supporting the superior and eliminating the inferior" in the adjustment of industrial structure.


Zhang Longqiang believes that in terms of production restriction, the principle of "one size fits all" and classified implementation should continue to be adhered to this year. For steel enterprises or electric furnace short process steelmaking enterprises that meet ultra-low emission standards and environmental protection performance rating A, there can be no production restriction requirements or less production reduction indicators.


"The steel industry will actively respond to the requirements of dual control of production capacity and output." Chen Hongbing, vice president and Secretary General of Jiangsu iron and Steel Industry Association, said that the output mainly depends on the market demand. It is suggested that the regulators should actively regulate the steel market demand and make more forecasts and rational guidance. As the market demand decreases, so will the output. In addition, it is still necessary to maintain a high pressure on new production capacity and actively control the release of new production capacity.


Li Xinchuang suggested that, guided by energy conservation, carbon reduction and pollution reduction, revise the Guiding Catalogue for industrial structure adjustment, eliminate backward processes, and redefine the standards of encouragement, restriction and backwardness. In the specific implementation process of production restriction, establish a crude steel output adjustment mechanism based on energy consumption, carbon emission, pollutant emission and safety, encourage the exertion of green, efficient and high-quality production capacity, and curb the production capacity with high energy consumption, high pollution and high emission.