Posco plans decarbonization with radical green steelmaking proposals

South Korean steelmaking giant Posco has said that it will embark on a highly ambitious plan to decarbonize its steelmaking operations in the country over the coming years

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At the heart of the plan is a move away from fossil-fuel-powered blast furnaces (BFs), and toward both new electric-arc furnaces (EAFs) and the use of green hydrogen to fuel existing furnaces, the company has said.

Posco intends to reduce its carbon dioxide emissions by 20% by the year 2030 compared with the average total emitted by the company’s Korean units over 2017-2019, the steelmaker said in a presentation to investors released on January 5.

The producer also hopes to reduce CO2 emissions by 50% compared with 2017-19 levels by 2040, and intends to become carbon-neutral by 2050, it said in December 2020.

In with the new

At the heart of Posco’s plans to achieve this large reduction in carbon emissions is the construction of two new EAFs in Korea, which will have combined crude steelmaking capacity for 2.5 million tpy, sources active in the country’s ferrous markets have told Fastmarkets.

Posco’s first new EAF will be located at the company’s sprawling plant in Gwangyang, in the south of the country, with the second unit to be built at the firm’s works in Pohang, on Korea’s eastern coast.

While the Gwangyang EAF unit is planned for launch in 2025, the Pohang unit is set for a 2027 launch, with construction activity on the furnaces set to begin next year, sources said.

Posco produced 28.7 million tonnes of steel in South Korea in the first three quarters of 2021, with a market share of 54.3% in South Korea, according to company statistics.

A Japanese scrap supplier source told Fastmarkets in December that Posco’s operations currently require around 4 million tpy of steel scrap, and the supplier expects this volume to rise sharply after the new EAFs are installed.

The company increased its appetite in 2021 for higher grades of scrap, such as heavy scrap (HS) and shredded from Japan, a trend that partly helped to raise the premium for these grades over the base H2 grade during the year.

Fastmarkets’ weekly price assessment for steel scrap heavy scrap (HS), export, fob main port Japan, averaged ¥55,125 ($477) per tonne in 2021, up sharply from ¥29,728 per tonne in 2020.

Out with the old

At the other end of the scale, in late December 2021, the company took the major step of permanently closing the company’s oldest blast furnace, BF No1 in Pohang, sources said.

The furnace started steel production in 1973, was renovated twice, and produced more than 55 million tonnes of steel over its lifespan, according to the South Korea Herald newspaper on December 29. The iconic BF had steelmaking capacity for 1.3 million tpy.

As of the third quarter of 2021, Posco has an overall crude steel production capacity of 33.91 million tpy in South Korea, according to company statistics made available to investors.

Hydrogen plants

In December 2020, at the time of its 2050 carbon-neutrality vow, Posco outlined a three-step approach to its handling of raw materials for the years ahead.

The first part of the process is to increase energy efficiency and replace the current fuel and raw materials with lower-carbon alternatives. Second, the firm wants to maximize the use of steel scrap alongside carbon-capture technology.

Third and finally, the producer said it wants to develop hydrogen-reduction steelmaking technology to devise a fully carbon-neutral steelmaking process based on green hydrogen and renewable energy.

Posco has now provided further information on its roadmap to this goal, aiming to build hydrogen production capacity for as much as 500,000 tpy by 2030, rising as high as 7 million tpy by 2050, it said in January.

The producer will achieve this, it said, by entering into equity investments with “Middle Eastern oil majors” and reviewing projects relating to steel businesses “in regions with abundant renewable energy sources.”

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