World Energy Outlook 2007

Iron and Steel
The iron and steel sector is the largest industrial consumer of energy in China,
accounting for 28% of total industrial energy use in 2005. It grew by 14.5%
per year between 2000 and 2005, while steel production grew by more than
20% per year in the period. China is currently the world’s largest producer of
steel, accounting for 34% of world steel production in 2006 (World Coal
Institute, 2007). The average efficiency of medium and large plants in China
is lower than that of plants in other countries using advanced technologies,
partly because scrap steel is not available for recycling and because ore is of poor
quality (IEA, 2007). 6 Moreover, less efficient small-scale blast furnaces drag
the average down still further. 7 Nevertheless, current efficiency levels are far
better than those prevailing in the early 1990s.
It is projected that energy demand growth for iron and steel production will
continue, but slow to 7% per year from 2005 to 2015 and to 2.9% per year
over the Outlook period. By 2030, coal continues to dominate the energy
mix, at 72% or 196 Mtoe, but electricity gains seven percentage points,
from 17% in 2005 to 24% or 64 Mtoe in 2030, as the use of electric
arc furnaces increases. The share of iron and steel in total industrial
energy consumption increases slightly in the near term but falls back to 26%
by 2030.
The rapid increase of growth in energy use for iron and steel in the short term
and slow-down in the longer term is due to several factors. Current sharp
output growth is expected to continue to around 2010, mainly driven by
booming domestic construction, but this is expected to slow down over the
Outlook period. In addition, major energy-intensity improvements are
expected. By 2030, China’s energy intensity falls by 14% from today’s levels,
as more scrap steel becomes available (boosting recycling) and more efficient
technologies are deployed (IEA 2007). The Chinese government is speeding
up this process by requiring the closure of small inefficient plants. It aims to
consolidate smelting companies, so that the top ten companies’ production will
comprise more than 50% of national output by 2010 and more than 70%
by 2020 (Steel Business Briefing, 2005). There are currently 6 686 steel
enterprises, 58% of which are in the coastal region.
6. Chinese ore contains less metal than ore in other countries (US Geological Survey, 2007).
Imports of iron ore have increased dramatically in China recently, reaching a record 326 million
tonnes in 2006 (CEIC, 2007).
7. Efficiency data for small-scale plants are not available. We estimate the energy efficiency gap
between the average and the best plant in China to be about 20% (IEA, 2007). Coking coal used to
produce coke and, as a by-product, blast-furnace gas are included in the transformation sector and
not in the industrial sector.
294 World Energy Outlook 2007 - CHINA’S ENERGY PROSPECTS