As early as 2022, the Chinese government set a clear target: to raise the share of electric arc furnace (EAF) steel to 15% of total crude steel production by 2025. The aim was to shift the industry away from its reliance on the carbon-intensive blast furnace–basic oxygen furnace (BF–BOF) route and toward lower-emission, scrap-based EAF steelmaking. Yet, three and a half years later, progress has stalled. EAF production continues to hover around 10%, with utilisation rates and profitability under sustained pressure.
This report reviews developments in China’s steel sector during the first half of 2025. It examines why the 15% EAF target is at risk, where current efforts fall short, and how recent policy shifts, such as output control and the liberalisation of scrap imports, could help close the gap. Most importantly, it argues that a strategic reset is needed: one that rebalances market conditions, aligns local incentives with national goals, and gives green steel more than symbolic support.
Key findings
- While China set a 15% electric arc furnace (EAF) steel share target for 2025, aimed at reducing the emissions of the country’s second-largest carbon-emitting industry, the actual share has remained stagnant at around 10% for over a decade.
- Missing the EAF target will increase China’s CO₂ emissions by over 160 million tonnes, which is nearly equivalent to the entire EU steel sector’s footprint.
- Although green steel policies offer support, scrap-based EAF producers remain at a structural disadvantage due to high electricity costs, unreliable scrap supply, and mounting financial losses, leading to widespread mill suspensions and at least one bankruptcy in mid-2025.
- Despite China’s recent liberalisation of imported scrap steel, imports halved in 2024, greatly hindering profitability for EAF steel production.
- Amid a national decline in crude steel output, ten provinces still saw year-on-year output increases in H1 2025, indicating that without sub-national compliance, structural overcapacity will continue to weaken China’s steel transition.
Figure 1 – Tracking China’s green steel transition, EAF share, target and capacity utilisation, 2019–2025H1
Figure 2 – Monthly profits of China’s steel sector, 2021-2015 H1
To turn goals into industrial transformation, China needs to reset its green steel strategy in the following ways:
- Reduce coal-based blast furnace–basic oxygen furnace (BF–BOF) production by at least 90 million tonnes in 2025 (or a 10% year-on-year reduction), and increase EAF capacity utilisation to 70%, which would increase EAF steel by about 40 million tonnes and save CO₂ emissions simultaneously.
- Improve conditions for scrap imports to ease short-term supply gaps, and treat scrap as a national strategic resource.
- Strengthen sub-national enforcement by policy tools such as linking compliance to fiscal incentives.
