Iron ore smashes US$150 a ton after Beijing eases steel's green targets

[BEIJING] China offered its huge steel industry five extra years of rising carbon emissions, sending iron ore soaring as investors saw the move as a renewed focus on propping up the economy.

Steelmaking accounts for about 15 per cent of China's carbon emissions. On Monday, the government set 2030 as the new deadline for peak-emissions for the sector, against an earlier target of 2025. That adds to signs that Beijing is recalibrating its climate strategy in light of last year's commodity price spikes, and priming the economy for a 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 policy pivot is another sign that Beijing is changing the trajectory of its decarbonisation plans to ensure industrial changes don't result in damaging inflation or shortages. President Xi Jinping said last month that climate targets shouldn't compromise supplies of commodities that "ensure the normal life of the masses."

Iron ore surged past US$150 a ton, with expectations rising for more infrastructure to soften China's economic slowdown. More construction activity tends to means higher steel output, which in turn raises iron ore demand but means more greenhouse gases.

The steelmaking raw material has rebounded more than 70 per cent from November's plunge on expectations of steadier growth in 2022. Beijing has already taken a series of measures - including interest-rate cuts and accelerating infrastructure projects - to stabilise an economy wracked a savage property-market slump and pandemic outbreaks. 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.

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 per cent to US$153 a ton, the highest level since Aug 31, and traded at US$148.20 by 4.20 pm local time. Dalian futures rose 0.5 per cent to 821 yuan (S$173.4). Steel rebar and hot-rolled coil futures also advanced in Shanghai. BLOOMBERG