During the fall in China's steel production, ordered by officials, Beijing was able to showcase its dedication to environmental goals and its ability to control commodity markets. In the midst of an economic slowdown, the government is unsure whether it will be able to sustain the cuts.

A year-on-year decline of nearly 50% was seen in Chinese crude steel manufacturing in July, the largest drop since the global financial crisis of 2008. The economy could shrink again this month, according to early indicators. Normal prodigious flows of timber that have been the subject of global trade tensions and environmental concerns have seen their flow curbed by 12.5 million metric tons in July, about twice Britain's annual total.

“We have to resolutely implement the output-cut policy—this is a political issue, and there is no room for bargaining,” said Chen Derong, chairman of Baowu Steel Group, China’s largest producer, at a conference this month.

Xie Zhenhua, from China's climate envoy office, said in Glasgow that the country intends to stick to its emission targets.

The steel cuts have driven global iron ore price down 40% since mid-July, delivering China twin triumphs: a show of policy leadership ahead of a major climate summit in Glasgow in November, and a demonstration that it can tamp down rising globe commodity pricing. Steel, China's second largest such emitter after power utilities, has an earlier commitment than the power utilities for carbon emissions that will peak by 2030.

In the first half of 2021, Chinese steel mills had churned out nearly 12% more crude steel compared to the same period in 2020, according to a Wood Mackenzie note.

The steel sector is one of the biggest polluters in China, producing around 10% to 20% of carbon emissions in the country. Beijing has targeted the industry as part of its bid to reduce carbon emissions and reach net-zero by 2060.

“It would involve a real slamming on of the brakes to get that down. We think steel output will be up around 8-9% this year,” Paul Bartholomew, lead steel analyst at S&P Global Platts, told the source in an email.

In response to Covid-19's surge, China's top brass has begun to remove some of its shackles. Xi Jinping met with high-level officials in late July to warn against "campaign-style" climate measures. Government media encouraged citizens to refrain from making "unrealistic pledges."

Image source- Livemint