China on right track to green steel, BHP’s Mike Henry says

Mike Henry has defended the pace of China’s timelines for cutting steel emissions, saying the country should be viewed differently to Europe.

BHP chief executive Mike Henry said China and much of Asia needed to be viewed from a different perspective than Europe. Picture NCA NewsWire / Aaron Francis

BHP boss Mike Henry has told a high-powered Beijing business forum that China will make a much slower pivot to green steel than Europe amid concern the world’s biggest consumer of iron ore was falling behind targets for slashing carbon emissions.

Mr Henry told the annual China Development Forum that nations around the world are working towards achieving net zero on different timelines, a move which made “total sense” given nations’ different starting points and “domestic economic and political considerations”.

China has set a target of hitting net zero emissions by 2060 but earlier this month it reported falling short of expectations in 2023 as it attempts to hit a goal of bringing emissions to a peak before the end of this decade.

China, the world’s biggest consumer of iron ore, still largely relies on traditional blast furnaces for the production of steel, using huge quantities of iron ore and coal as part of an emissions intensive process.

But the BHP boss said China and much of Asia needed to be viewed from a different perspective than Europe, which is pursuing renewable-power electric arc furnaces.

“With an older steel industry, European blast furnace steel plants, the predominant method for producing new steel, are fast approaching the end of their economic lives,” Mr Henry told a panel on carbon neutrality and climate governance.

“A higher stock of steel in the European economy and lower rate of economic growth, also mean that more scrap steel is available. These two factors enhance the economic attractiveness of building new, state of the art, Electric Arc Furnaces, powered by renewable energy.”

Mr Henry said China should not be compared with Europe given its younger blast furnace fleet.

“But China is different from Europe. Given the remarkable economic growth that China has unlocked in recent decades, China’s blast furnace steel facilities are much, much younger. This is also the case in India and Southeast Asia. And steel is still being added to the economy on a net basis, meaning the ratio of scrap available to demand, is much lower than in Europe.”

BHP last week warned new rival suppliers will test Australia’s iron ore dominance after prices fell below $US100 a tonne.

Macquarie Equities downgraded BHP from outperform to neutral with a $42 per share target because of cuts to the medium-term outlook for iron ore, driven by the west African supply response and weaker-than-expected Chinese demand.

Mr Henry talked up the efficiency of Chinese furnaces.

“Many Chinese blast furnace mills are state-of-the-art already – far less energy intensive than other blast furnaces on the market. So, given younger, less carbon intensive blast furnaces, and less scrap availability, Chinese steelmakers are understandably looking at continuing to use these assets rather than replacing them earlier than otherwise would be the case,” Mr Henry said.

“However, they are also showing deep commitment to reducing their carbon intensity and are pursuing opportunities like hydrogen injection, as well as applying a technology like carbon capture, utilisation and storage to abate higher and higher amounts of greenhouse gas emissions. BHP is supporting further investigation of this effort through multiple partnerships.”

BHP’s new chief financial officer Vandita Pant said she saw a balanced market for iron ore, with demand coming from infrastructure projects and parts of the Chinese economy in the past year.

But in the long term she expected a sharp increase in iron ore output, which could act as a headwind for prices.