Green steel produced using hydrogen can reach price parity with steel made using traditional carbon-intensive processes by 2050, according to a study by researchers at Oxford University’s Department of Engineering Science.

The study modelled 12 different supply-chain formats for meeting Japanese demand for steel from Australian iron ore. Japan is the world’s second-biggest steel exporter after China.

Under a model where high-quality renewables are used to power manufacturing facilities next to iron ore reserves in Western Australia, the falling cost of renewables and hydrogen mean steel can be produced for A$716-948/t ($500-661/t) in 2050, the study found.

The current steel price is highly volatile but is approximated at A$722/t for the purposes of the study.

A$716-948/t – Cost of steel production in 2050

Manufacture would be carried out using the DRI-EAF method of steel production, enabling green hydrogen to be used in various parts of the supply chain. The gas would be used as a feedstock to reduce iron ore to sponge iron in the shaft furnace, to provide thermal and electrical energy for production processes, and to provide power for fuel cells that propel shipping vessels.

Some of the models evaluated the possibility of shipping hydrogen to Japan, where it could be used to manufacture steel closer to sources of demand. These models showed a final cost of steel that is more expensive than a model in which all manufacture is carried out in Australia.

But they did show that hydrogen could be transported more efficiently by liquefying it than by converting it to ammonia as it would not require ammonia cracking prior to direct reduction in Japan.

Interim carbon price

Because efficiency gains will take some time to achieve, and the cost of hydrogen and renewables will come down over time, the model shows steel production costs will be higher in 2030 than in 2050—A$913-1,284/t compared with the A$716-948/t range for 2050.

For green steel to reach price parity in 2030, the model showed a carbon price in the range of A$66-192/t CO₂ would be needed.

Hydrogen production costs were modelled by the study to reach A$2.94/kg in 2050 and A$4.75/kg in 2030.

Producing 40mn t/yr of decarbonised steel in the most efficient way in 2050 would require 74-129pc of Australia’s current electricity output and A$137-328bn in capital investment for solar power, production and shipping infrastructure.

This investment needs to be made in the next decade to avoid the lock-in of carbon-intensive assets, according to the study.

“This would mean a large financial barrier to be tackled, a challenge further compounded by the consideration of investment losses on existing fossil-based assets,” it says.

Co-operation underway

Trade links are already established between the two nations: Japan’s imports of Australian iron ore represent 4pc of global ore trade.

Both are actively promoting a hydrogen-based economy and have signed a number of hydrogen co-operation deals, including collaborating on a project to produce and transport blue hydrogen to Japan from Australia’s Latrobe Valley.

---

Author: Tom Young