2024年中國(guó)鋼鐵行業(yè)脫碳融資報(bào)告-技術(shù)、政策和金融工具（英文版）-CBI氣候債券倡議組織

Financingthe

decarbonisationof

China’ssteelindustry:

technology,policyandinstruments

PublishedbytheClimateBondsInitiative

TableofContents

Reportsummary2

Introduction3

Backgroundon

steeldecarbonisation4

Steelproduction

anddecarbonisationoptions4

Chinesesteelcorporatetransitionobjectives5

Transitionfinanceforsteel

decarbonisation:policy,standard

development,andmarketlandscape6

Transitionfinanceframeworkandcriteriadevelopment6

Chineselabelledbondandloanmarkets8

Discussion9

Financingthelow-carbontransitionofsteelproduction9

Carbonpricingtoenhancesteelsectorcarbonmanagement

awarenessandcapacity10

Greenpublicprocurementtopromotedemandforgreensteel10

Outlook11

Endnotes22

Reportsummary

Thisdecadeispivotalforthetransitionofthe

steelsectortowardsthetargetssetoutinthe

ParisAgreement.InChina,78%(730.8Mt/yr)of

theexistingcoal-basedblastfurnacecapacitywillneedreinvestmentby2030,demonstratingthemagnitudeofinvestmentneededtodevelopandrolloutlow-carbonsteelmakingtechnologies

totransformthesector.

1

Therefore,financial

flowsmustbealignedwithaParis-compatiblescenariotoavoidlock-in,andbeinplaceforthenextinvestmentcycle,giventhelongevity

ofsteelassets.

Currently,zero-carbonsteelistechnicallyfeasiblebutexpensive.ThesteelsectorinChinarequiresfixed-assetinvestmentestimatedtobeatleast

CNY1.6tn(USD220bn)fordecarbonisationby

2050,thefinanceforwhichcouldbesupplied

bythesustainabledebt

market.2

Thisreport

exploresleverstoacceleratethedecarbonisationofthesteelsectoranddescribeshowtransition

financecansupplytherequiredcapital.Thefollowingaspectsareexplored:

?Alignmentofguidance.Provincialtransitionfinanceguidanceisalreadyinplaceandneedsfurtheralignmentbothinter-provincially,andinternationallytosupportcapitalflowstowardssteeltransition.

?Inclusivepoliciestoencouragealltypesofentities.Transitionfinanceguidance

andpoliciesmustbeinclusiveforalltypes

ofentitiestoacceleratethedeploymentof

low-carbonproductionandprovideincentivesforcompaniestoachieveaclimate-aligned

transition.Morefocusshouldbegivento

deepdecarbonisationmethods(e.g.,greenhydrogen)andthetransitionofsmallandmediumenterprises(SMEs).

?Thelabelledbondandloanmarketcan

providethefinancerequired.Steelentitiesshouldbeencouragedtodeploythelabelledbondandloanmarkettofinancethetransition.

Investorappetiteisstrong,andthemarket

canabsorbthefundingneededwithguidanceavailablefromClimateBondsandothersto

ensurecredibility.

?Carbonpricingmechanismswilladd

urgencytothetransition.Carbonpricing

mechanisms(carbontradingmarketsand

carbontariffs)domesticallyandinternationallywillincreaseemissioncostsandoperating

pressureonsteelcompanies,whichwillencouragethemtotransition.

?Strongpublicpolicyshouldcreatedemandforgreensteel.Greenpublicprocurement

canstimulategreensteeldemandand

acceleratetheshiftbycompaniesinthesteelsectorfromhigh-emittingmethodstolow-carbonproduction.

FinancingthedecarbonisationofChina’ssteelindustry:technology,policyandinstrumentsClimateBondsInitiative2

Introduction

Steelproductioncurrentlyaccountsforaround8%ofglobalCO2emissions,makingitthelargestcontributortogreenhousegas(GHG)emissionsamongtheglobalindustrialsectors

.3

Despite

pledgesandactions,currentdecarbonisation

progressinthisindustryisfallingbehindthe

ParisAgreementgoals.4

Meanwhile,globalsteelproductionishighlyconcentratedgeographically.Nearlyhalfoftheworld’ssteeliscurrently

producedinChinaandtheworld’sfivelargeststeelmakersaccountforaboutthree-quartersofglobalproduction:China’sBaowuGroup,HBIS,AnsteelGroup,ShagangGroup,Luxembourg-

basedArcelorMittal,andJapan’sNipponSteel

.5

Forsteelandotherindustrialsectorsknownas

hard-to-abate,thebarrierstodecarbonisationaremuchhigherthanothersectors.Steelisacapital-intensiveindustrysoitstransformationdependsoninnovativelow-carbontechnologiesbeing

mobilised,aprocessthatrequiressignificantfinancialsupport.

Globalagreementonemissionsreduction,andChina’sownnationallydeterminedcontribution(NDC)toreachpeakemissionsby2030and

carbonneutralityby2060(2030:2060targets),callforthesteelindustrytodevelopoperableplanstoreduceitsemissions.China’sleading

steelproducers,includingtheHBISGroup,Ansteel,andBaowuGroup(whichrepresent22%ofChina’stotalsteelproductionand12%ofworldsteel

productionrespectively)haveallreleasedcarbonpeakandcarbonneutralityroadmapsandaction

plans.YetthesteelsectorinChinarequiresfixed

assetinvestmentestimatedtobeatleastCNY1.6tn(USD220bn)fordecarbonisationby2050,accordingtorecentresearchbyRockyMountainInstituteand

ClimateBonds.6

AmongtheestimatedCNY1.6tn

fixedassetinvestment,researchersestimate33%investmentforenergyefficiency,23%forelectricarcfurnace,18%fordirectironreduction,14%

forCCUS,7%forblastfurnacehydrogeninjection,and5%forpelletmanufacturing.

Thedecarbonisationofsteelisnotonlya

technologicalchallengebutalsoafinancialandpoliticalone.Inadditiontotheidentificationofanewrangeofdecarbonisationleversguidedthroughsectorcriteria,itwillrequirefinance

fromtheprivatesector,supportedbypolicy

measures.TheUSD120tndebtmarketiswell

placedtoabsorbthisfinancingneed.ClimateBondsresearchpointstoashortageofsupplyofgreenbondsbearingtherequiredcredentials,suggestingthatthereissufficientinvestor

demandtosupporttherequiredtransition

.7

However,steelassetlifetimesoftenexceed40

yearssotheinvestmentdecisionsmadetodaycanlockinbillionsoftonsofemissionsand

potentiallybillionsofdollarsinstrandedassets

.8

Thisreportsummarisespolicy,technology,andmarketoptions,anddiscusseshowpolicies,

sectorcriteria,andtoolscansupportsteel

companiestofinancelow-carbontransitionsandadoptdeepdecarbonisationtechnologies.

FinancingthedecarbonisationofChina’ssteelindustry:technology,policyandinstrumentsClimateBondsInitiative3

Backgroundonsteeldecarbonisation

Steelproductionand

decarbonisationoptions

Technologiessuchas

recycling,low-carbon

hydrogen,electrification,andcarboncapture,utilisation

andstorage(CCUS)present

opportunitiestotransformthe

steelindustry.Thereareseveralwaystoachievecarbonneutralityinsteelproductioninthe

medium-andlong-term.

Option1:scrap-basedproductioninelectricarcfurnaces(EAFs)toproducerecycled

steel.AccordingtotheInternationalEnergy

Agency(IEA)theshareofrecycledsteelinsteelproductionmayriseto45%by2050,whileoverallsteeldemandcouldincreaseby40%

.9

Hence,theincreaseinglobalsteeldemandcoupledwith

limitedavailabilityofscrapsteelwillstillrequiresignificantprimarysteelproduction(useofironoretoproducesteel)by2050,demonstratingthatEAFscannotbetheonlysolution

.10

Option2:low-carbonhydrogen-baseddirectreduced-ironEAFtechnology(hydrogen-basedDRI-EAF).HYBRIT,thefirstprojecttodelivera

batchoffossil-freesteel,madefromlow-carbonhydrogen,waslaunchedin2016andjointly

fundedbySwedishSteelCompany(SSAB),MiningCompany(LKAB)andPowerCompany(Vattenfall).Low-carbonhydrogenisusedtodirectlyreduceironoreandthefirstbatchoffossil-freesteelwasdeliveredin2021.

11

Option3:complementexistingfossilenergy-basedproductionprocesseswithCCUSto

neutralisegreenhousegasemissionsintheironandsteelmakingprocess.

Option4:furtherdevelopmentofnew

technologiessuchaselectrolysisofironore.

Therearetwomainsourcesofinputmaterials

forsteelproduction:a)iron-makingandsteel-makingbasedonironore,andb)recyclingscrapsteelforre-smelting.Presently,therearethreemainsteelproductionprocesses:

?BlastFurnace–BasicOxygenFurnace(BF-BOF)productionprocess;

?Scrap-basedelectricarcfurnace(EAF)productionprocess,and;

?Hydrogenmetallurgyprocess.

Eachofthesesteelproductionprocesses

presentslargedifferencesincarbonemissions,bothintermsofthesourceofthecarbon

emissionsandtheintensityperoutput.Thosearelaidoutinthetablebelow.

Themainchallengetoimprovinghydrogen-basedmetallurgyisthesupplyandcostoflow-carbonhydrogen.Currently,globallow-carbon

Table1.Steelproductionprocessandsourcesofemissions.

Productionprocess

Mainsourceofemissions

Averageemissionintensitybasedon2022.

(CO2pertonofcrudesteelcast)

BF-BOF

Mainlyfromthecombustionoffossilfuelssuchascoalcoke,indirectemissionsfromtheuseofelectricityandheat,andprocessesemissionssuchasconsuminglimestone.

2.33

Scrap-EAF

Mainlyfromtheemissionsgeneratedusingelectricityandheat,aswellasemissionsfromscrapsteel,limestone,andotherindustrialproductionprocesses.Thereisalsoasmall

amountofemissionsfromthecombustionoffossilfuelssuchasfossilgas.

0.68

DRI-EAF

(Hydrogen

metallurgyisatthepilotstage,includinghydrogen-based

directreduction

iron-making,

hydrogen-basedsmeltingreductioniron-making,etc.)

Currentcarbonemissionsmainlycomefromthecombustionemissionsoffossilfuelssuch

ascokeovengases,emissionsfromtheuseofelectricityandheat,andemissionsfromindustrialproductionprocessessuchastheuseoflimestone.

Note:todate,hydrogenmainlycomesfromhydrogen-richgasessuchascokeovengases.Inthefuture,theuseofgreenhydrogenwillbeexplored.

1.37

*EmissionintensityfromtheWorldSteelAssociationforaglobalaveragebasedon2022calculation

.23

hydrogenproductionaccountsforapproximately5%ofthetotal.Asdemandfromtheglobal

industrialandtransportationsectorsisexpectedtogrow,manygovernmentshavereleased

industriallow-carbontransitionstrategiesthat

includeplanstoscaletheirproduction,including

throughsubsidies.Therehasbeenasignificantincreaseinnear-zero-emissionprimary

steelmakingprojectsglobally,withthepipelinegrowingfrom5Mt/yrin2021to13Mt/yrin2022,andacapacityofover100Mt/yrisrequired

forthesectortokeepontracktonetzero.

12

Currently,40Mthavebeenplannedfordirectreducedironcapacity,andseveralcorporationshaveannouncedplanstoincreaseEAFsteel

productioncapacity

.13

Greenhydrogenisbelievedtohavethepotentialtoreduceemissionsfromsteelproduction

emissionsbyupto98%.Asscrapsteelislimited,theuseofgreenhydrogentoreplacecoalasareducingagentwillbeessentialtosupportsteeldecarbonisation.Thecostofgreenhydrogenisinfluencedbyvariousfactorssuchasthecost

ofrenewableenergyelectricity(solar,wind,

etc.,),electrolysersystemcosts,electrolyser

operatingtime,hydrogenpolicies,andend-useapplications.AccordingtotheInternational

RenewableEnergyAgency(IRENA),thecostofgreenhydrogenisexpectedtodecreasefrom

anaverageof4-6USD/kgtobelow2USD/kg

by2030.Similarforecastshavebeenmadeby

PwC,bycomparingprojectionsof15scenariosfromsevendifferentreports,indicatingaglobalreductionof50%ingreenhydrogencostsbefore2030.

14

AjointreportbytheChinaHydrogen

AllianceandAccenturesuggeststhatthe

productioncostofhydrogeninChinaisexpectedtodecreaseto2.18USD/kgby2030.

15

Downstreamsteelusers,suchasautomakersandrealestatecompanies,arealreadyactivelypre-purchasingzero-carbonandlow-carbonsteel.

AsofMay2022,Adient,BMWGroup,Electrolux,

Marcegaglia,Mercedes-Benzandothersallhavepre-purchasedzero-carbonsteelfromSwedishsteelcompanyH2GreenSteel.Together,these

offtakeagreementsaccountforapproximately1.5Mtperannumfor5-7yearsandrepresentmore

thanhalfoftheexpectedH2GreenSteelfirst-yearproductioncapacityof2.5Mt.

16

FinancingthedecarbonisationofChina’ssteelindustry:technology,policyandinstrumentsClimateBondsInitiative4

Chinesesteelcorporatetransitionobjectives

TomeetChina’stargets

ofpeakcarbonby2030

andcarbonneutralityby2060,thetopthreeChinesesteel-producingcompanies(Baowu,Ansteel,HBIS),

representing22%ofChina’stotalproduction,haveannouncedemissionreductiontargets.

Baowuaimstoachievea30%reductionby

2035,andcarbonneutralityby2050.

17

HBIS

strivestoachievecarbonneutralityby2050,andAnsteelalsopledgestoreduceemissionsby

30%by2035.

18,19

Steelcompanieshavealsostartedtotake

actiontowardsdecarbonisation.Forexample,in2021,HBISstartedtopilottheDRIproject

constructioninHebei.

20

In2023,theHBISGroupobtainedapprovalforthefirstfull-scalegreenprimarysteelprojectinChina,representinga

USD683minvestment,withtheconstruction

periodscheduledfromOctober2023to

September2025.

21

In2022,Ansteelstartedto

constructa10,000-toncapacitygreenhydrogendemonstrationproject

.22

Morethan80%ofChinesesteelcompanies

areSMEswithaproductionscaleofless

thanfivemilliontons,andthese80%ofsteelcompaniescontributeto40%oftotalChinesesteelproduction.CredibletransitionfinanceinstrumentsforSMEsarebeingdevelopedtosupporttherequiredtransformation.

FinancingthedecarbonisationofChina’ssteelindustry:technology,policyandinstrumentsClimateBondsInitiative5

Transitionfinanceforsteeldecarbonisation:

policy,standarddevelopment,andmarketlandscape

Transitionfinancereferstofinanceearmarkedtosupportthedynamicprocessofdecarbonisinganentity.Transitionfinancecanbeseenasa

sub-setofgreenfinancebecauseitcontributestoabetterenvironmentaloutcome.Thischaptersummarisessteelsector-specifictransition

financeguidancefromregulatorsandbanks,themarketlandscapeoflabelledbondsandloansinChina,andadiscussiononleverstoaccelerate

thesteelsectortransition.

Transitionfinanceframeworkandcriteriadevelopment

Steelcompaniescanaccess

financingfromChina’sgreenfinancemarket,thoughonlyafewactivitiesareeligible

undercurrentguidance.IntheChinesegreenfinancemarket,

accordingtotheGreenBondEndorsedProjectsCatalogue(2021version)bythePeople’sBankofChina(PBoC),steelcompaniescanobtain

financingthroughlabelledgreenbondsfrom

variouscategoriesattheprojectlevel,includingenergyefficiency,heatrecycling,wasteand

resourcerecycle,greenhydrogen,biomass,

andCCUS.

24

ThecurrentChinesegreenfinancemarketcoverssupportattheprojectlevelandasmallnumberofeconomicactivitiesinthehigh-emittingindustries;thus,theemergingChinesetransitionfinancestandardsandguidance

canfacilitatemoretargetedfinancingforthetransitionofsteelcompaniestonetzero.

Financialregulatorsareactivelydeveloping

guidancetopromotetheorderlygrowthoftheChinesetransitionfinancemarket.ThePBoCandrelevantdepartmentsareresearchingtransitionfinanceguidancetosupportthelow-carbon

transitionofhigh-emittingindustries,andsteelisoneofthefocussectors.Since2022,atleast

eightprovincesandcitiesinChinahavelaunchedtransitionfinanceguidelines,includingHebei,akeysteel-producingprovincethataccountsfor20%ofChina’stotalsteelproduction

.25

Hebei

Province’sTransitionFinanceGuidelinesfortheIronandSteelIndustry(2023-2024Edition)lists176technologiesthattheprovincialtransitionfinanceguidancecansupport.Theguidelinedefinesthetimeframeforthetransition:short-

termtargets(2025),medium-termtargets(2030),andlong-termtargets(by2060).Inaddition,theHebeiprovincialtransitionfinanceguidance

alsoappliestodownstreamcompanies(e.g.,automotivecompanies),incentivisingthemtopurchasegreensteel.

Intheinternationalmarket,transitionfinancehasalsoreceivedwidespreadattention.At

thenationallevel,countriesorregionshave

startedtoformulateguidingpoliciesforthe

developmentoftransitionfinance,andthereareongoingeffortstoharmonisedefinitions.

?GuidelinessuchastheTransitionFinance

GuidelinesissuedbytheResearchInstituteforEnvironmentalFinanceofJapanareconsistentwiththeInternationalCapitalMarkets

Association(ICMA)ClimateTransitionFinanceHandbookandsteelisoneofthekeysectors.

26

Suchguidelinesincludeatransitionroad

mapfortheindustry,listingpotentialrelevantdecarbonisationtechnologies,including

energyefficiencyimprovements,heatrecovery,CCUS,electricfurnaces,COURSE50,

27

and

hydrogen-baseddirectreductionofiron.

28

?TheEUTaxonomyusestechnicalscreening

criteriatodeterminewhethersteelproductionmeetsspecificthresholds,includingmolteniron,sinter,coke,castiron,andEAF,aswellassettingrequirementsforscrapsteelinputintoEAF.

29

?TheSingapore-AsiaTaxonomyforSustainableFinance2023adoptstheClimateBonds

SteelCriteria,whichsetsdetailed

decarbonisationrequirementsfortheuse

ofproceeds,assets,entities,andsustainability-linkeddebtinstruments.

30,31

Financialinstitutionshavealsoreleased

frameworksforthesteelsector,whichopenmorefinancingchannelsfortheChinesesteelsector

toaccessclimatefinance.Theindustry-led,andUN-convened,Net-ZeroBankAlliance(NZBA)releaseditsTransitionFinanceGuideinOctober2022,whichincludesbasicrequirementsforthetransitionfinanceframeworkofNZBAmemberbanksthatencourageeachbanktoestablish

itstransitionfinanceframework.

32

Bytheendof2023,afewmemberbanksofNZBAsuchas

StandardCharteredBank,DBS,andMaybank

hadestablishedatransitionfinanceframework

andincludedthesteelindustryaspartoftheir

transitionfinanceprojectcatalogue.InChina,

ChinaConstructionBankandBankofChina

successivelyissuedtheTransitionBondFrameworkandtheTransitionBondManagementStatement.

Basedonpublicinformationdisclosure,the

tablebelowsummarisescurrentpractices

fromfinancialinstitutionsontransitionfinancedefinitionsandeligibilityforthesteelsector.

FinancingthedecarbonisationofChina’ssteelindustry:technology,policyandinstrumentsClimateBondsInitiative6

Table2.Transitionfinanceframeworksfromfinancialinstitutionsforthedecarbonisationofthesteelsector.

Financial

Institutions

Transition

Frameworks

Eligiblefinancingtypes

Steelsector

DBS

Sustainable&

TransitionFinanceFramework

&Taxonomy

33

Useofproceeds

Corporatelevelfinancing

Ironorsteelproducers(excludingcoal-firedironorsteelplants):

1.Decarbonisationtechnologies(e.g.,scrap-based(recycled)steel,carboncaptureandstorage,electrolysis).

2.Energyefficiencyofblastfurnace(e.g.,cokedryquenching,productiongasesreuseforpowerproduction).

StandardChartered

TransitionFinanceFramework

34

Eligibleprojectsandactivities

Corporations

whereatleast90%ofthecompany’srevenues

arederivedfromactivitiesintheFramework

Scrap-basedproductionofsteel;Scrap-basedEAF;

HydrogenbasedDRI;Ironoreelectrolysis;

Electrificationofancillaryequipment;

Partialhydrogeninjectionintocommercialblastfurnaces;Innovativesmeltingreduction;

Natural-gasbasedDRIwithCCUS;Innovativeblastfurnaceretrofit.

Maybank

TransitionFinanceFramework

35

Transition/

transition-linkedbonds/loans

Blastfurnace:Emissionsintensitybelow1.551tCO2e/tofsteel;andmeetseitherofthecriteria:1.theaverageemissionsintensityovertheentirelifetimeofthefacilityisbelow0.897tCO2e/tofsteel,OR

2.thefacilityfollowsTPI’s2-degreescenariodecarbonisationpathwaythroughoutitslifetime.

Retrofitofexistingfacilitiesthatresultinanemissionsintensitylowerthan1.551tCO2e/t

throughthefollowingmeasures,includingbutnotlimitedto:increasingthermalefficiency;useofbiochar;integratingCC(U)S.

EAF+scrapusing90%ofironcontentfromscrap.

DRI-EAFsubjecttotheanyofthefollowingfeedstockcriteria:

?DRIusingrenewableenergywithEAF;

?DRIusingnaturalgaswithEAF;

?DRIusingbiogas/hydrogen/biochar)withEAF;

R&Donlow-carbonsolutionssuchasdirectelectrolysisorsmeltingreduction.

China

ConstructionBank

TransitionBondFramework

36

Useofproceeds

Reductionofcarbonemissions/energyconsumptionduringsteelprocessing(includingbutnotlimitedtotheuseofhydrogenandbiomassasreducingagents).

Collectionandrecyclingofscrapironandsteel,andutilisationofscrapironandsteelforsteelreproduction.

Furnaceheatingwithlow-carbonfuel(includingbutnotlimitedtonaturalgas).

Recoveryandutilizationofwasteheatenergy(includingbutnotlimitedtorecoveryandutilisationofwasteheatenergyduringsinteringanddryquenching).

Carboncaptureandstoragetechnologyforthesteelindustry.

Researchanddevelopmentoftechnologiesthatcanreducecarbonintensity/energyconsumptionofsteelproduction.

BankofChina

TransitionBondsManagement

Statement

37

Useofproceeds

Reductionofcarbonemissions/energyconsumptionduringsteelprocessing(includingbutnotlimitedtotheuseofhydrogenandbiomassasreducingagents).

Collectionandrecyclingofscrapironandsteel,andutilisationofscrapironandsteelforsteelreproduction.

Furnaceheatingwithnaturalgas(includingbutnotlimitedtonaturalgas).

Recoveryandutilisationofwasteheatenergy(includingbutnotlimitedtorecoveryandutilizationofwasteheatenergyduringsinteringanddryquenching).

Carboncaptureandstoragetechnologyforthesteelindustry.

Researchanddevelopmentoftechnologiesthatcanreducecarbonintensity/energyconsumptionofsteelproduction.

FinancingthedecarbonisationofChina’ssteelindustry:technology,policyandinstrumentsClimateBondsInitiative7

Chineselabelledbondandloanmarkets

Asmentionedabove,climatetransitionfinancerefers

tofinanceearmarkedto

supportthedynamicprocessofdecarbonisinganentity.Transition-linkedbondscan

beusedbycorporatestofinancetheirclimatetransitioneitherasuseofproceeds(UoP)

bondsorgeneralpurposebondslinkedtokeyperformanceindicators(KPIs):

?UoPbonds,suchasgreenorsustainability

bonds,fundprojectswithspecificand

dedicatedenvironmentaland/orsocial

benefits.Adherencetostandardsand

predeterminedUoPcategoriesprovidethe

meanstodefininganddisclosingtheirimpact.

?Performance-linkedbonds,suchas

sustainability-linkedbonds(SLBs),areusedforanissuer’sgeneral-purposefinancingtosetambitious,realistic,andexplicitsustainabilitytargetsatthecorporatelevel.Theyinvolve

penaltiesorrewardslinkedtomeeting(ornot)pre-definedandtime-boundsustainability

performancetargets(SPTs)foreachofitspredeterminedKPIs.

AccordingtoClimateBonds,Chinawasthe

world’slargestgreenbondmarketforthe

secondconsecutiveyear.Asoftheendof2023,atotalofCNY4.46tn(USD616.2bn)oflabelled

greenbondshadoriginatedfromChinain

domesticandoverseasmarkets,ofwhichnearlyCNY2.7tn(USD372bn)meetClimateBonds’

greendefinitions.

Despitethecontinuousexpansionofthe

Chineselabelledbondmarket,only0.1%hasoriginatedfromissuersinthesteelsector.Steelcompaniescanissuegreenbondsaccording

totheChineseGreenBondEndorsedProjects

Catalogue(2021edition)forvariousprojects,

includingrecycling,energyefficiency,hydrogen,andCCUS.AccordingtotheClimateBonds

datasets,issuersfromtheChinesesteelsector

hadissued23greenbonds(CNY3.5bn)andsix

sustainability-linkedbonds(CNY1.6bn)bytheendof2023,representing0.1%ofthetotalChinese

labelledbondmarketvolume(CNY4.46tn).

TheChineselabelledloanmarketisninetimes

thesizeofthelabelledbondmarket;however,loandisclosuretendstobescant.Bytheendof2023,thetotaloutstandinggreenloanvolumewasCNY30.08tn(USD4.15tn)accordingtothe

PBoC,representing12.7%ofthetotalChinaloanmarket.

38

Granulardataonthetotalvolumeof

greenloansforsteelprojectsisnotavailable,noraredetailsonproceedstowardgreenhousegasreductionprojects.Informationdisclosedthroughcasestudiesshowsthatgreenloanshavesupportedthepollutantcontrolprojectsofthesteelsectoroverthepastseveralyears.

Forexample,asofJuly2022,atotalof251

steelcompaniesinChinawithacrudesteel

productioncapacityofabout681milliontonshavecompletedorareimplementinganultra-lowemissiontransformation.Thecumulative

investmentinultra-lowemissiontransformationofsteelcompaniesacrossthecountryhas

exceededCNY150bn(USD21bn)

.39

Comparedtotheprogresstowardslow-carbon

transition(estimatedatleastCNY1.6tn),the

currentissuancevolumefromtheChinesesteel

sectorisverysmall(accumulatedCNY5.1bn).Thelabelledbondandloanmarketcansupplytherequiredcapitalbutissuersoperatinginthesteelsectormustbeencouragedtopricedealswiththerecommendedtransparencyandcredibility.

Casestudy1:Hydrogen

metallurgical

decarbonisationfinancing

Thiscasestudyintroducesaperformance-basedinstrumentdesignedtosupport

hydrogen-basedsteelproduction.

InMay2022,BaoshanIronandSteelCo.,Ltd.pricedaCNY500m(USD70m)SLBwithaninterestrateof2.68%.Thedealwas

issuedtosupporttheZhanjiangironand

steelmillion-tonhydrogen-basedshaft

furnacesystemproject.Ituseshydrogen

metallurgytechnologytoreplacecarbon

withhydrogen,useshydrogen-basedshaftfurnacelow-carbonmetallurgytoreplacetheconventionalblastfurnaceprocess,anduseshydrogenenergytoreplacefossilenergy.

Inaddition,thehydrogen-basedshaft

furnacesystemprojectusescokeoven

gas,aby-productofthecokingprocess,asreducinggastoachieveresourcerecyclingandreducetheconsumptionoffossi