China’s Steel Industry Faces Big Challenges

China’s steel industry is the largest in the world. It makes a lot of steel for China and for other countries. But now the industry faces big problems with climate, money and trade.

Steel makes about 16% of China’s carbon emissions. China wants to peak emissions before 2030 and reduce net emissions by 7–10% by 2035. In 2025, emissions fell mostly because less steel was made, not because of greener methods. Experts say the industry must switch from blast furnace steel to electric arc furnace (EAF) steel. Using more EAF steel could cut emissions 37% by 2035.

The steel industry also has money problems. There is too much steel, domestic demand is weak and debt is rising. Between 2020 and 2025 liabilities grew by over 1 trillion CNY. Switching to EAF steel could help the industry earn up to 220 billion CNY and make finances more stable.

Globally, China’s steel exports grew from 13.3% to 29.2% of the market from 2020 to 2025. This has caused trade issues and exposure to new carbon rules like the EU Carbon Border Adjustment Mechanism. Producing more green steel is key to staying competitive in the world market.

Experts say China’s steel industry can improve by:

Aligning climate, industry and trade policies.

Reducing blast furnace steel faster.

Raising the EAF steel share to 20% by 2030.

Supporting efficient steelmakers and letting inefficient ones exit.

The industry is at a turning point. With the right actions. It can reduce emissions, fix financial problems and keep its place in global trade.