Assessment of relocation of electric furnace steelmaking process by province-level regions in China under carbon neutrality target

As China moves toward its carbon neutrality target, transforming its steel industry has become one of the most pressing challenges. The sector still relies heavily on the carbon-intensive blast furnace–oxygen furnace process, while electric arc furnace (EAF) steelmaking is emerging as a promising low-carbon alternative. Yet its expansion faces uneven resource distribution and regional constraints—so what shapes the regional deployment of low-carbon steel production in China?

To address this issue, a research team led by Tae-Yong Jung at Yonsei University applied the AIM-China/Steel model to evaluate where EAF steelmaking could expand across China. The model incorporates scrap supply, electricity costs, interprovincial transportation, and steel demand to estimate the levelized cost of steel production under different scenarios.

The team published their findings in Energy and Climate Management on March 13, 2026.

“The results show that regional scrap supply and the feasibility of scrap transport jointly determine the spatial distribution of EAF capacity,” said authors. In other words, the future deployment of low-carbon steel production in China is not only a matter of technology choice, but also a question of where key resources are located and how efficiently they can be moved across regions.

The study further explains that cost structures are shifting over time. “With the decrease of electricity cost and the application of energy-saving technology, electricity accounts for a relatively small proportion in total production cost,” the authors wrote. In contrast, material costs—especially scrap—are becoming increasingly decisive. Even when electricity prices differ across regions, transportation costs can outweigh these differences. As a result, local production is generally preferred when scrap is available, while interregional transport becomes a secondary option when local supply is insufficient.

These constraints are particularly evident in western China. “In all scenarios, the supply of scrap steel in the western region is in short supply… transporting scrap steel or EAF steel to the western region is not cost competitive,” the authors emphasized. Despite having access to abundant and low-cost renewable energy, these regions remain limited in their ability to expand EAF steelmaking. Instead, they may have greater potential to develop alternative low-carbon pathways such as hydrogen-based direct reduced iron (H-DRI).

The study also explores how these constraints may shape future development. Under optimistic scenarios with sufficient scrap supply, the study suggests that China could achieve a fully EAF-based steel production system by 2050. However, this transition is unlikely to be uniform, with some regions producing surplus steel while others remain constrained by resource limitations.

Beyond these resource constraints, policy also plays a significant role in shaping industrial location. “Policy has a great influence on the location of steel refineries, as governments can attract investment through tax incentives and lower land costs,” the authors noted. Strategic policy design could help promote a more balanced regional distribution of steel production, while also supporting economic development in less-developed regions such as Qinghai and Xizang, where the expansion of the steel industry could bring significant economic benefits.

The findings provide quantitative evidence to support province-level planning of EAF capacity and highlight the importance of coordinated regional strategies in achieving China’s carbon neutrality goals.

This work was supported by Korea Environment Industry & Technology Institute (KEITI) through "Climate Change R&D Project for New Climate Regime", funded by Korea Ministry of Environment (MOE) (Grant No. 2022003560012).

About the Authors

Tae-Yong Jung is a professor at the Graduate School of International Studies at Yonsei University, Republic of Korea. He served as Chair of the Organizing Committee for the 2024 annual meeting of the Integrated Assessment Modeling Consortium (IAMC) and is President of the Korea Integrated Assessment Modeling Association. He was also a Coordinating Lead Author of the Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report and currently serves as Director of the Sustainable Development Program at the Ban Ki-moon Foundation. Homepage: https://yonsei.elsevierpure.com/en/persons/tae-yong-jung/; Email: TYJUNG00@GMAIL.COM.