[C Tech Now] Steel Industry's Carbon Neutral Challenge Finds Solution in 'Hydrogen'

Hydrogen-Based Steelmaking for 'Green Steel'
Replacing Coal Reductants with Hydrogen in Blast Furnaces
Europe Uses Shaft Reactors, POSCO Uses Fluidized Reactors
Challenges Include Hydrogen Price Realism and Large-Scale Electricity Supply

Molten iron is pouring out from the FINEX furnace at POSCO Pohang Steelworks.

German steel company Thyssenkrupp announced last March that it would build a pilot plant for Direct Reduced Iron (DRI) production in Duisburg with an investment of about 3 billion euros (approximately 4.4 trillion KRW). Two-thirds of the investment cost, amounting to 2 billion euros, is supported by the German federal government and the state of North Rhine-Westphalia, where Thyssenkrupp's headquarters are located. Direct Reduced Iron is a steelmaking technology that uses hydrogen instead of coal, which is used in the traditional blast furnace method to produce molten iron. The plant was planned to start operations in 2027.

However, recently, the German daily Handelsblatt reported, citing internal documents from the company, that Thyssenkrupp is reconsidering this plan due to financial difficulties. The company has not officially confirmed this report, but it is a clear example showing that steelmakers are struggling with decarbonization despite massive government subsidies.

Decarbonization of the steel industry is a critical hurdle to overcome in order to achieve carbon neutrality by 2050. This is especially true for countries like South Korea with a strong manufacturing base. According to Climate Solutions, a domestic climate-related NGO, the carbon emissions from the domestic steel industry account for 40% of the industrial sector's emissions. The steel sector accounts for 15% of South Korea's total carbon emissions, with a single company, POSCO, responsible for 10%. Regulations such as the European Union's Carbon Border Adjustment Mechanism (CBAM) and the Global Sustainable Steel Agreement between the United States and the EU are also being strengthened. Decarbonizing the steel industry has become an essential task to achieve carbon neutrality goals and maintain the global competitiveness of the domestic steel industry.

POSCO Chooses Fluidized Reduction Furnace, Europe Uses Shaft Reduction Furnace

Green steel, which emits no carbon, is based on hydrogen reduction steelmaking that uses hydrogen as a reducing agent instead of traditional coal. The current widely used blast furnace (BF) and electric furnace (EF) structure is replaced by a reduction furnace and electric furnace structure. European steel companies such as ArcelorMittal, SSAB, and Salzgitter, as well as Nippon Steel of Japan, produce direct reduced iron using shaft reduction furnaces, while domestic POSCO is pursuing carbon reduction through its proprietary fluidized reduction furnace technology.

Iron (Fe) is an unstable element and naturally exists as iron oxide (Fe2O3), which consists of two iron atoms and three oxygen atoms. The basic steelmaking process involves removing oxygen to produce pure iron. This oxygen removal process is called reduction, and the substance used for this is the reducing agent. Traditionally, coal has been used as the reducing agent.

In the traditional blast furnace and basic oxygen furnace (BOF) method, iron ore and coal are used as raw materials for steelmaking. First, powdered iron ore (pelletized ore) and coal are sent to a sintering plant (which heats powdered iron ore at high temperatures to form sinter) and a coke plant (which removes volatile substances at high temperatures to produce coke lumps), respectively.

The sinter and coke produced are layered in the blast furnace, and hot air at 1200 degrees Celsius is blown in from the tuyeres at the bottom. As the coke burns, carbon monoxide (CO) is generated, which then reduces the iron ore to produce pure iron (Fe) and carbon dioxide (CO2). The heat inside the blast furnace, exceeding 1500 degrees Celsius, causes a melting reaction that melts the iron ore to produce molten iron (hot metal). Coal acts both as a reducing agent and as a raw material for the melting reaction. Approximately 2 tons of carbon dioxide are emitted per ton of iron produced by the blast furnace method. The process of converting powdered iron ore and coal powder into sinter and coke improves permeability inside the blast furnace, facilitating the reduction reaction.

The molten iron produced in the blast furnace is transferred to a large ladle-shaped basic oxygen furnace (BOF). In the BOF, pure oxygen (O2) is blown into the molten iron to remove impurities such as phosphorus, sulfur, and carbon, refining it into steel.

The coal-based blast furnace and BOF process accounts for 70% of global steel production. Although this method has been optimized over a long period to use energy efficiently, it has been criticized for emitting greenhouse gases such as carbon and various environmental pollutants.

Accordingly, research on eco-friendly processes that do not emit carbon or pollutants has been steadily conducted. Representative examples include using pellets or direct reduced iron (DRI) instead of powdered iron ore in the blast furnace. Pellets, which are spherical iron ore processed to a uniform size, have a high iron content and reduction efficiency, resulting in lower carbon emissions. DRI is a raw material from which oxygen has already been removed from iron ore, reducing coal consumption.

There is also a method to reduce carbon by using natural gas (NG) instead of coal in the blast furnace. However, these methods are considered transitional technologies, and completely different processes are needed for carbon neutrality.

European steelmakers are first attempting to reduce carbon emissions by using natural gas as both fuel and reducing agent in shaft reduction furnaces. Pellets are fed into the shaft furnace, heated, and natural gas is injected. The natural gas converts into carbon monoxide and hydrogen, which trigger the reduction reaction to produce solid-state direct reduced iron. This DRI is then melted in an electric furnace to produce steel. The shaft reduction furnace and electric furnace method using natural gas can significantly reduce greenhouse gas emissions compared to the traditional blast furnace-BOF method.

Taking a step further, carbon neutrality is realized by using hydrogen in the shaft reduction furnace. When pellets contact high-temperature hydrogen gas in the reduction furnace, hydrogen removes oxygen from the iron ore, producing water (H2O) and solid direct reduced iron. The DRI is then sent to an electric furnace for melting. The hydrogen used is green hydrogen produced from renewable energy. If the electric furnace also uses renewable energy, no carbon emissions occur.

POSCO has developed a different fluidized reduction furnace method. Unlike Europe, South Korea imports all its iron ore, making it difficult to obtain pellets, so POSCO developed technology to directly use powdered iron ore. If European steelmakers switch to the shaft reduction furnace method, a pellet shortage may occur.

▲Panorama of Pohang Steelworks Finex Plant 3

The fluidized reduction furnace injects high-temperature reducing gas from below into the reduction furnace containing powdered iron ore, mixing the iron ore in the air like a liquid while reducing it. POSCO's fluidized reduction furnace technology, the FINEX process, feeds powdered iron ore into the reduction furnace and uses 75% carbon monoxide and 25% hydrogen as reducing gases.

The powdered direct reduced iron produced in the fluidized reduction furnace is placed into a melting furnace to convert it into molten iron, which is then refined in a basic oxygen furnace. The reducing agent is carbon monoxide generated in the melting furnace where coal is used, which is recycled as the reducing gas in the fluidized reduction furnace. Since the FINEX process does not require sintering and coke-making processes, it reduces costs and carbon emissions.

The HyREX process is an extension of the FINEX process that eliminates coal and uses 100% hydrogen as the reducing agent. In HyREX, direct reduced iron reduced by hydrogen in the fluidized furnace is sent to an electric furnace for refining. POSCO plans to complete HyREX technology development by 2030 and replace existing facilities with HyREX by 2050.

Hydrogen Price and Electricity Supply Are Challenges

Hydrogen reduction steelmaking is proposed as a solution to achieve carbon neutrality by 2050, but significant challenges remain. First, to secure the economic feasibility of hydrogen reduction steelmaking, hydrogen must be produced in large quantities and its price must decrease from current levels. POSCO predicts that one commercial HyREX facility will require 170,000 tons of hydrogen annually. Currently, the production cost of green hydrogen ranges from 5 to 10 dollars per kilogram depending on the country. Experts believe that the price of green hydrogen must fall below 1 dollar per kilogram to make hydrogen reduction steelmaking economically viable.

Hydrogen reduction steelmaking uses electric furnaces, requiring massive amounts of electricity. In 2021, about 2.9 GW of electricity was used, and it is expected that electricity demand will increase to 4.6 GW by 2050 when the transition to hydrogen reduction steelmaking is complete. Without a plan to secure electricity supply, the transition to hydrogen reduction steelmaking will be difficult.

Currently, POSCO generates its own power using by-product gases from blast furnaces and other processes. Only 15% of the required electricity is purchased from Korea Electric Power Corporation, while 85% is self-generated. However, if the melting furnace is converted to hydrogen reduction steelmaking, no by-product gas will be produced, making self-generation impossible.