On June 30, 2026, China’s Ministry of Industry and Information Technology (MIIT) released updated steel industry decarbonization rules that will test the limits of industrial emissions reduction. For foreign manufacturers sourcing steel, components, or finished industrial goods from China, these rules change the game.
Why It Matters
China produces 54% of the world’s steel — roughly 1.02 billion metric tons in 2025. Every foreign manufacturer with a China supply chain, from automotive to construction to appliances, is exposed. The new rules set binding carbon intensity targets for steel mills starting January 2027, with penalties of up to RMB 200 per ton of CO₂ over limit (approximately US$27.50).
Three forces are converging: Beijing’s 2030 carbon peak commitment, the EU’s Carbon Border Adjustment Mechanism (CBAM) which began its definitive phase in January 2026, and domestic steel overcapacity that the government has been trying to curb since 2021. This isn’t just environmental policy — it’s industrial restructuring.
The Details: 5 Changes to Track
1. Carbon intensity caps by furnace type. Blast furnace-basic oxygen furnace (BF-BOF) mills must drop from 1.85 tons CO₂ per ton of crude steel to 1.65 by end-2027. Electric arc furnace (EAF) mills, which currently account for only 9.4% of Chinese production, get a softer target of 0.35 tons CO₂ per ton. Mills that miss targets face production quota cuts of 10-30%.
2. Three-year phase-out for inefficient capacity. Mills with capacity below 1 million tons per year and carbon intensity above 1.9 tons CO₂/ton must either upgrade or close by mid-2028. An estimated 80-120 million tons of annual capacity falls into this bucket — roughly 8-12% of China’s total.
3. CBAM alignment incentives. Mills that install continuous emissions monitoring systems (CEMS) and achieve EU-recognized verification can receive a “green steel” certification that reduces CBAM liability for EU-bound exports. As of June 2026, only 23 Chinese steel mills have this certification. The government aims to triple that by end-2027.
4. Raw material sourcing requirements. The rules require mills to disclose the carbon footprint of their iron ore and coking coal inputs by 2028. This creates a cascading compliance burden — your Chinese steel supplier now needs to audit its own suppliers, which may push smaller mills out of the export market.
5. Regional disparity in enforcement. Hebei province, which produces 23% of China’s steel (roughly 235 million tons), gets stricter targets and earlier deadlines. Guangdong and Jiangsu have longer transition windows. If your supplier is in Tangshan, expect faster compliance — and potentially faster price increases.
What You Should Do
If you source steel-intensive products from China, take these steps before Q4 2026:
- Map your steel exposure. Identify which of your Chinese suppliers use BF-BOF vs. EAF steel. BF-BOF mills face the steepest cost increases — estimate 5-12% price uplift by mid-2027.
- Request carbon disclosure now. Don’t wait for the 2028 deadline. Suppliers who can provide CEMS-verified data today are the ones who will survive the consolidation. If your supplier can’t answer basic carbon intensity questions, start scouting alternatives.
- Factor CBAM into total landed cost. The EU CBAM certificate price tracks EU ETS allowances, currently around €78/ton CO₂ (June 2026). A ton of Chinese BF-BOF steel at 1.85 tons CO₂ intensity incurs roughly €144 in CBAM costs. “Green steel” from certified EAF mills cuts that by 70%.
- Watch for consolidation opportunities. China’s steel industry has consolidated from 11,000+ mills in 2015 to roughly 5,200 today. The new rules will accelerate that. The surviving mills will be larger, more compliant, and — if you lock in relationships now — potentially better long-term partners.
One Data Point
The number to remember: 80-120 million tons — the annual steel capacity that may disappear from China’s market by mid-2028. That’s more than Germany’s entire annual steel production (36 million tons) by a factor of 2-3x. If your supply chain relies on smaller Chinese mills, start planning your transition now.
— China Gateway 360 —
Remote China market entry support, built around execution.
