In the series ① and ② of carbon neutralization of iron and steel released in 2021, we respectively discussed that “de production” is the fastest way to achieve “carbon peak” in the medium and short term, and “hydrogen metallurgy” is the inevitable development direction to achieve “carbon neutralization”. Starting from the emission reduction planning and practice of large steel enterprises outside China, this report will analyze the mainstream means of China’s steel emission reduction in the next decade and the corresponding potential market opportunities.
Core view
Developing innovative metallurgical technology is an inevitable choice for China’s iron and steel industry to realize “carbon neutralization”. “Carbon neutralization” of iron and steel is a systematic and complex arduous task, which depends on the comprehensive utilization of multi-disciplinary and multi field technologies such as metallurgy, carbon recycling and utilization, hydrogen energy and so on. As metallurgy is the carbon input source of iron and steel production, it is inevitable to greatly increase the proportion of scrap or carry out innovative innovation of metallurgical technology.
Hydrogen metallurgy is the most important, supplemented by electric furnace steelmaking. All scrap steel can replace iron ore to become the greenest “iron source”, and the short-term process technology of all scrap steel is mature, but why do large steel enterprises not vigorously develop electric arc furnace as a short-term carbon reduction deployment? We believe that the conditions for the great development of electric arc furnace – scrap resources, cheap power and equipment upgrading of electric arc furnace are not mature.
Hydrogen rich blast furnace process may be the mainstream technology in the next decade, and hydrogen based direct reduction iron may usher in great development after 2030. The goal of “carbon neutralization” of iron and steel is ambitious, but it still needs to be implemented step by step. Combined with the goal of 30% emission reduction in 2030-2035, the hydrogen rich blast furnace process can be based on the existing assets of China’s iron and steel industry and usher in rapid growth in the next decade. Hydrogen based direct reduction iron is the ultimate technology of hydrogen metallurgy. However, due to the weak foundation of direct reduction iron in China, it is expected to be popularized on a large scale after 2030.
“Carbon neutralization” rejuvenates the vitality of metallurgical engineering, and the market scale of blast furnace transformation may reach 100 billion in the next decade. If the penetration rate of blast furnace hydrogen rich transformation in China can reach 50% by 2030, referring to the investment density of Xinjiang Ba Yi Iron & Steel Co.Ltd(600581) blast furnace transformation and considering certain optimization space, the market space of blast furnace hydrogen rich transformation in China may reach 440 billion in the next decade. Among them, safe and efficient gas heating device is a new application under the development of blast furnace hydrogen enrichment, which is a subdivision field with more growth flexibility.
Hydrogen based direct reduction iron will affect the synchronous upgrading and innovation of upstream and downstream, and the long-term investment may involve trillion yuan. The investment intensity of hydrogen based direct reduction iron is about 1.3 times that of blast furnace transformation, and the market space is obviously wider. In order to achieve “zero carbon”, it will also drive the supporting investment in the transformation and upgrading of downstream process electric arc furnace and upstream clean energy hydrogen production. Among them, high temperature gas cooled reactor hydrogen production has the advantages of strong safety, large scale of hydrogen production and high energy utilization efficiency. It has also become one of the development directions of hydrogen metallurgy.
Investment proposal and investment object
To sum up, the “carbon neutralization” of iron and steel will inevitably drive the upgrading and innovation of China’s metallurgical technology and pry the 100 billion market of metallurgical engineering. On the one hand, it is suggested to pay attention to iron and steel enterprises with strong comprehensive strength and profound R & D accumulation in hydrogen metallurgy, such as Baoshan Iron & Steel Co.Ltd(600019) (600019, not rated), Xinjiang Ba Yi Iron & Steel Co.Ltd(600581) (600581, not rated), Hbis Company Limited(000709) (000709, not rated), Sgis Songshan Co.Ltd(000717) (000717, not rated), etc;
On the other hand, focus on metallurgical engineering companies benefiting from carbon neutralization of steel, such as Metallurgical Corporation Of China Ltd(601618) (601618, not rated), Sinosteel Engineering & Technology Co.Ltd(000928) (000928, not rated), and Zhejiang Jiuli Hi-Tech Metals Co.Ltd(002318) (002318, buy) with the ability to supply high-grade materials for new units, and Sino-Platinum Metals Co.Ltd(600459) (600459, not rated) risk tips benefiting from the increased demand for precious metal catalysts for reducing gas reforming and water electrolysis hydrogen production
The progress and mode of policy introduction do not meet expectations, the technological development is not as expected, the risk of repeated covid-19 epidemic in China and overseas, and the risk of the impact of changes in assumptions on the calculation results of market space.
