A new report jointly released by the Climate Bonds Initiative and Transition Asia reveals a surge in transition finance within China’s steel sector, following the release of the Guidelines for Transition Finance in the Iron and Steel in December 2023.
As China’s largest steel-producing region, Hebei is also the first sub-national authority to launch dedicated transition finance guidelines specific for steel decarbonisation, catalysing a swift market response.
By the end of 2024, steel companies in Hebei had secured over USD2.8 billion in transition loans. Nationally, 12 labelled bonds linked to steel decarbonisation were issued, totalling USD3 billion. The report estimates that USD18 billion in capital expenditure is needed for the sector to adopt technologies such as electric arc furnaces (EAFs), direct reduced iron (DRI), and hydrogen electrolysers. It also provides guidance for companies seeking climate finance and recommends policy actions to align financial incentives with net-zero goals.
“The rapid uptake of transition financing in China’s steel sector highlights the power of clear, credible guidance to mobilise capital at scale."
Wenhong Xie, head of China programme, Climate Bonds Initiative.
According to Wenhong Xie, head of China programme, Climate Bonds Initiative, “The rapid uptake of transition financing in China’s steel sector highlights the power of clear, credible guidance to mobilise capital at scale. As the world’s largest steel producer, China has a unique opportunity—and responsibility—to lead the global shift toward low-carbon steel. Looking ahead, we see significant potential to expand the investable universe and align financial flows with sectoral decarbonisation. This report offers timely insights to strengthen the next phase of policy, investment, and market innovation.”
Bonnie Zuo, China engagement lead, Transition Asia, added: “As China prepares its 2026–2030 national economic development plan, there is a critical window of opportunity to align policy frameworks to facilitate low-carbon development in the steel sector. With an estimated USD18 billion capital gap over the next five years to deploy low-carbon steel technologies, building a supportive financing ecosystem and fostering transparent, value-chain-wide discussions on how to share the green steel premium will be essential. Strategic measures, including investing in low-carbon hydrogen DRI, launching green procurement programmes and enhancing scrap steel recovery can provide a strong foundation for a more resilient, competitive and climate-aligned steel industry.”