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By BigMint Bureau : A study by Mysteel Global predicts that China’s electric arc furnace (EAF) steelmaking process will become more cost-effective than blast furnace-basic oxygen furnace (BF-BOF) methods by 2039. This shift is expected as rising carbon emission costs will burden traditional BF-BOF operations.
Current Cost Imbalance
As of 2024, EAF steelmaking is more expensive than BF-BOF, with EAF costs at RMB 3,330 per tonne, about RMB 208 higher than BF-BOF. This higher cost is due to factors like electricity and electrode expenses, even though EAF uses more recycled steel scrap, which is cheaper than pig iron used in BF-BOF.
Carbon Emission Costs on the Rise
China’s national carbon emissions trading scheme (ETS) will soon include the steel sector, adding pressure on carbon-intensive industries like BF-BOF. As free carbon allowances decrease by 2027, carbon prices are expected to rise, further increasing the cost of BF-BOF steelmaking.
EAF Cost Advantage by 2039
Mysteel projects that by 2039, EAF steelmaking will have a slight cost advantage over BF-BOF, with average costs for EAF at RMB 3,178 per tonne, compared to RMB 3,180 for BF-BOF. However, EAF steel may still struggle to compete in high-end markets like automotive and home appliances, where BF-BOF is preferred for higher purity steel.
Future Outlook
Although EAF steelmaking will gain cost efficiency, improvements in steel quality may be necessary for EAF to capture more market share in specialized industries. Advances in technology and growing environmental pressure will likely reduce these limitations over the next 15 years.
Source: Mysteel Global and BigMint
