China launched its steel decarbonisation initiatives later than many developed nations. However, it has since achieved considerable progress, laying the groundwork for a potential leadership role in the global green steel transition. Transition Asia believes China will lead the global green steel race through both comprehensive national low-carbon strategies and an accelerating shift towards low-carbon practices in the automotive sector.
China’s Strategic Path to Green Steel Leadership
1. Green Hydrogen
China leads in green hydrogen development with national targets. As of June 2024, renewable hydrogen capacity reached 100,000 tonnes annually, with 8 million tonnes in development. Regarding the cost, the China Hydrogen Alliance forecasts green hydrogen costs will decrease to $4/kg by 2025 and $2.4/kg by 2030. Transition Asia estimates a 29% premium reduction when the H2 price drops from $5/kg to $4/kg and a 10% reduction when it reaches $2.4/kg.
2. Renewable Energy
China leads globally in wind and solar capacity, providing ideal conditions for green hydrogen and low carbon EAF production. While major steel provinces aren’t in the most renewable-rich areas, they have RE resources comparable to European H2-DRI project locations. Transition Asia finds that using 100% RE for EAFs adds minimal costs while cutting emissions by 89-91% in scrap-EAF and H2-DRI-EAF steelmaking.
3. DRI: Projects and Raw Material Security
China is developing DRI projects with an estimated capacity of 6 million tonnes annually. These facilities currently use fossil based hydrogen but are ready to switch to green hydrogen when pricing and infrastructure allow.
| Location | Company | Project Name | DRI Capacity (t/year) | Reduction Gas |
| Zhanjiang,
Guangd |
Baosteel | Baosteel Zhanjiang Iron & Steel DRI
expansion Project |
1 M | Natural gas, coke oven gas |
| Zhangjiakou,
Hebei |
HBIS | HBIS Group Paradigm Project | 1.2 M | Coke oven gas |
| Wuhai,
Inner Mongolia |
Jianlong Steel | Jianlong-Inner Mongolia Saisipu
Company H2-DRI Project |
0.3 M | Coke oven gas |
| Rizhao,
Shandong |
Rizhao Steel | Rizhao Steel Hydrogen-based Gas DRI
Project |
0.5 M | Vinyl acetate production |
| Xingtai,
Hebei |
Xingtai Steel | Low Carbon Hydrogen-rich Iron Making Technology Transformation Project | 1.65 M | Smelting furnace off- gas |
| Jinzhong,
Shanxi |
Zhongjin
Metallurgical Tech |
Hydrogen-based DRI Project | 0.3 M | Coke oven gas |
| Baotou,
Inner Mongolia |
Mintal Group | Gas-based Shaft Furnace DRI Project | 1.1 M | Coal |
| Anshan, Liaoning | Ansteel | Angang Group Green Hydrogen Zero Carbon Project | 10,000 | Green hydrogen |
Source: Transition Asia
H2-DRI-EAF production needs 67% iron content ore, above China’s domestic 62% grade. China currently imports 80% of its iron ore, in order to ensure material security and stable supply of high grade iron ore China is aiming for 370 million tonnes of reserves by 2025 through the “Cornerstone Plan” and international mine development.
4. Industrial Rationalisation to Enable Low-carbon Transition
China is prioritising the industry-wide transformation for a low-carbon future by halting steel capacity replacements and setting EAF production targets of 15% by 2025 and 20% by 2030. To achieve this, the country aims to consolidate the industry, targeting the top five steel enterprises to hold 40% market share and the top ten to account for 60% by 2025. While this restructuring impacts the labour market, it creates the opportunities to retire inefficient BFs and strengthens the capacity of leading companies to develop EAF and DRI facilities.
4. Anticipation of Steel Inclusion in China’s Emission Trading System
China’s MEE issued draft proposals in late 2024 to include steel in its ETS. Currently, China adopts the carbon emission allowance mechanism, where high emitters must purchase additional allowances if their emissions exceed their free allowance cap or face penalties, while low emitters can profit from trading surplus allowances. With free allowances set to gradually tighten from 2027, China ETS could serve as a powerful incentive for steelmakers’ continued efforts toward carbon reduction.
Faster and Further: What Automakers Must Do to Drive Steel Decarbonisation
China has seen a surge in green steel procurement MOUs, with Baosteel, HBIS and Shougang leading collaborations with automotive and construction industries. Taking these MOUs as a great start, automakers could drive faster and further on steel decarbonisation.
Stronger Demand, Longer Commitments
Green steel procurement adds less than 1% to vehicle costs at hydrogen prices of $5/kg , offering automakers a cost-effective way to reduce Scope 3 emissions. In China, green steel MOUs lack legal enforceability, creating uncertainty in supply chains.
Longer commitments are needed to ensure certainty throughout the supply chain. Adopting binding, long-term agreements—following Europe’s example, where companies like Stegra have secured 7-year contracts with automakers such as ZF and KIRCHHOFF—can help stabilise supply and reinforce demand for green steel.
Standardisation of Green Steel needs support
Despite the growing number of green steel products, many lack transparency in their production methods and emissions data, with some using mass-balanced approaches to mix in low-carbon steel. The industry urgently needs clear, transparent, and unified standards to differentiate genuine low-carbon steel from greenwashed products. As key buyers of steel,automakers are well-positioned to influence industry-wide standards through their procurement practices, driving the development of credible, sustainable benchmarks for low-carbon steel.
Scrap Recycling
Automakers have a unique advantage in scrap recycling. While scrap often faces quality and contamination issues because of the complexity of the social recycling system, automakers can collect and recycle clean scrap back to steelmakers, creating a win-win scenario where both parties benefit while supporting low-carbon secondary steel production.
Steelmakers and automakers are natural allies in decarbonisation as their decarbonisation goals are linked and can affect the entire value chain. Beyond green steel supply, more partnerships are suggested, such as aligning mutual decarbonisation strategies and jointly developing low-carbon pathways.