Inspenet, June 25, 2023.
Japanese steelmakers Nippon Steel and JFE Steel along with Korean POSCO are leading East Asian corporations, have comparable starting points and face the same resource constraints. But while Nippon and JFE still see a role for blast furnaces in 2050, POSCO is betting on hydrogen.
These three companies have divided views on the role hydrogen will play in the long term, but share a common focus on the rise of electric arc furnaces (EAFs) by 2030.
Since 2013, companies in Japan have been upgrading and refining blast furnace (BF)-based technologies with the goal of extending the life of coal-dependent fleets, drawing on their extensive experience in this complex equipment. However, the latest trends indicate that a diversification towards the use of hydrogen is taking place.
On the other hand, POSCO has announced its commitment to transform its domestic steel production capacity to use hydrogen as an energy source. The company will leverage its expertise in fuel cell technology and develop a proprietary H 2 -based direct reduction method to make sponge iron. In addition, it is actively seeking international collaborators with adequate resources, such as low-cost, low-carbon energy , as well as high-quality iron ore, to support its ambitious hydrogen-related plan.
Today, the fleets of the three companies are dominated by BF production. However, there is a consensus that increasing the use of electric ovens is the best first step towards decarbonization . To start the transition and achieve intermediate goals by 2030, the participants are building advanced electric furnaces, capable of high-quality, large-scale production while investing in new electric furnaces and acquiring existing capacity in emerging markets abroad.
Steelmakers expanding overseas for clean energy
The three steel companies have begun building facilities abroad with the aim of expanding their presence and preparing for a more diversified value chain in a net-zero future.
Guaranteeing the supply of metallic raw materials and clean energy is one of the main reasons behind this global expansion. For this reason, destinations like the Middle East, Australia, Brazil, and Canada are popular due to their abundant renewable resources and rich iron ore reserves.
JFE Steel has reached an agreement with Emirates Steel Arkan to explore direct reduced iron (DRI) or hot briquetted iron (HBI) production in Abu Dhabi. Production will use abundant and inexpensive local natural gas as a reducing agent to replace high-grade iron ore and coal supplied by Itochu.
For its part, Nippon Steel recently began considering a $700m investment in a hydrogen-based steel project, potentially in Australia and Brazil.
In 2022, POSCO announced plans to invest heavily in Australia, committing $28 billion to renewable energy development and green hydrogen production to be used for HBI production. Another $12 billion is earmarked for steel equipment modernization, bringing total investment in the country to $40 billion by 2040.
The other area of focus is optimizing existing production and integrating more EAF
All three steelmakers have invested in or purchased electric arc furnaces abroad, particularly in Southeast Asia and North America.
In 2022, Nippon Steel bought majority stakes in two EAF steel mills in Thailand, acquiring a 1.5 million metric ton (Mt) electric arc furnace in Chonburi from GJ Steel and a 1.8 Mt electric arc furnace in Rayong at G Steel. Both produce hot-rolled steel sheets to satisfy local markets.
Nippon Steel expanded into the US, through its flagship joint venture with ArcelorMittal. The company, known as AM/NS Calvert, invested $775 million in a 1.5 Mt plant in Alabama with production set to come online in the second half of 2023. In 2022, POSCO started to build a 1.5 Mt electric arc furnace in Mexico, with $43 million already invested.
In addition to reducing emissions, these companies are trying to move steel capacity closer, building it closer to its end-use market. This is to capture the growing demand from emerging markets, particularly in low-end construction steel. As a result, their operations in their home markets will also become more efficient, making their future not only lower carbon, but also more diversified.
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