Iron-ore roared past $150/t as China moved to prioritize economic growth by giving the country’s giant steel industry five extra years to start reining in its carbon emissions.
Carbon flows from the vast and highly-polluting steel sector should peak in 2030, against an earlier target of 2025, according to a government statement on Monday. That adds to broader signs that authorities are recalibrating climate strategy in light of last year’s commodity price spikes, and with the economy primed for more powerful, carbon-intensive stimulus.
“This is a big adjustment to the timetable, which gives more room for the steel sector to reach peak emissions in an orderly way,” said Xu Xiangchun, an analyst with researcher Mysteel. A rush to meet carbon goals could lead to “unbearable economic costs”, he said.
The adjustment is a boost for iron ore as investors weigh just how much stimulus authorities will unleash to steady China’s fragile economy. More construction activity tends to means higher steel output, which in turn raises iron ore demand but means more greenhouse gases. Steelmaking accounts for about 15% of China’s carbon emissions.
THREE DIGITS
The steelmaking raw material has rebounded from November’s plunge below $100 a ton, on expectations of steadier growth in 2022. Beijing has already taken a series of measures -- including interest-rate cuts and accelerating infrastructure projects -- to stabilize an economy wracked a savage property-market slump and pandemic outbreaks.
The delay on steel targets matches recent rhetoric from Beijing on balancing green goals with other objectives. President Xi Jinping said last month that climate targets shouldn’t compromise supplies of commodities that “ensure the normal life of the masses.”
The policy shift may put China’s overall target of reaching peak emissions by 2030 at risk, according to Li Shuo, analyst at Greenpeace East Asia. Traditional sectors such as steel will need to peak much earlier to make space for sectors such as transportation that are still developing, he said.
JOINT STATEMENT
The Monday statement was published on the website of the Ministry of Industry and Information Technology, and undersigned by two other powerful bodies: the National Development and Reform Commission, and the Ministry of Ecology and Environment.
Iron ore futures in Singapore rose as much as 3.8% to $153 a ton, the highest level since August 31, and traded at $149.75 by 12:27 p.m. local time. Prices are up more than 70% since crashing to multi-year lows in November.
Dalian futures rose 2.3% to 836 yuan. Steel rebar and hot-rolled coil futures also advanced in Shanghai.