Hydrogen-based steel: green hydrogen procurement strategies for Korea
Pathways and procurement structures to localise hydrogen DRI for Korean steelmakers.
The introduction of green hydrogen production support policies is a necessary condition for achieving national carbon neutrality goals, strengthening energy security, and enhancing industrial competitiveness. In the future, the competitiveness of foundational industries such as steel will depend on their ability to produce low-carbon, high value-added products.
The Case for Domestic Green Hydrogen
Without strong support for low-carbon fuels such as green hydrogen and renewable energy, Korea's industrial structure risks remaining dependent on fossil fuels and may ultimately face obsolescence.
Expanding hydrogen-based steelmaking (Hydrogen-based Direct Reduced Iron — H-DRI) in Korea can accelerate the realisation of a hydrogen economy, not only reinforcing energy security but also contributing to job creation and regional economic development through new infrastructure investments.
Cost Analysis: Domestic vs. Imported Hydrogen
Currently, the government plans to increase the domestic clean hydrogen self-sufficiency rate through imports of hydrogen produced abroad. However, it presents underestimated import price projections that do not accurately reflect the costs associated with the conversion and transportation of foreign-produced hydrogen.
If green hydrogen needed for hydrogen-based steelmaking is procured from abroad:
- Production cost per ton of steel will be ₩220,000 KRW higher in 2033
- And ₩590,000 KRW higher in 2050 compared to using domestically produced green hydrogen
Cost Offset Mechanisms
Even under optimistic projections for domestic green hydrogen price reductions, the additional cost of hydrogen-based steelmaking compared to the conventional blast furnace–basic oxygen furnace process is estimated to be around ₩300,000 KRW per ton of steel by 2050. However, this cost can be partially or fully offset through:
- Falling PPA (Power Purchase Agreement) prices due to the expansion of renewable energy
- Introduction of policies supporting renewable energy production and procurement for electrolysis
- Expansion of the low-carbon steel product market