Posted on 21 Feb 2023
South Korea has announced a steel industry development strategy and plans to create a 150bn South Korean won ($115.9mn) fund to support low-carbon steel production.
The strategy aims to lay the foundation for the steel sector to evolve and includes plans such as ensuring stable ferrous scrap supply and replacing blast furnaces with hydrogen direct reduction reactors, the country's trade and industry ministry (Motie) said on 16 February.
Ensuring a stable supply of ferrous scrap is especially important given a likely increase in global demand for ferrous scrap, which is an essential raw material for electrical arc furnaces (EAFs), as countries seek to decarbonise. Global steel scrap demand was at 690mn t in 2021 and will rise to 1.26bn t by 2050, Motie said, citing US-based direct reduced iron technology firm Midrex. Japan is also contending with a potential scrap shortage by 2030 as its steel mills switch to EAFs.
Countries have also started to restrict ferrous scrap exports, Motie said. The EU adopted new regulations in December 2022 that will restrict exports of scrap metal to non-OECD countries. But the European parliament in January voted to adopt an amended regulation that will allow exports to non-OECD countries that apply for consent and demonstrate their ability to treat waste sustainably through third-party audits.
Ferrous scrap is currently treated as waste under South Korea's Waste Management Act and is subject to various regulations, resulting in "a lack of an institutional foundation for fostering it as a resource industry", Motie said. Motie will consequently consult the country's environment ministry to exclude ferrous scrap from the act by recognising it as a circular resource, and also review legislation to support business activity such as scrap manufacturing.
Second, South Korea aims to replace 11 blast furnaces with 14 hydrogen direct reduction reactors by 2050. The government will set aside W26.9bn over 2023-25 to finish developing the hydrogen direct reduction technology by 2025, with hydrogen used instead of coal to reduce iron ore. It will also secure a budget to conduct a 1mn t demonstration by 2030. Motie expects the introduction of this technology to cut the steel industry's carbon emissions by 85pc or 86mn t, from 101.2mn t in 2018.
There will also be an investment of W240bn by 2030 to develop technology to minimise carbon emissions in existing blast furnaces and EAFs through fuel substitutions and high-efficiency EAFs. This is in light of the amount of time introducing hydrogen direct reduction technology will take.
Third, South Korea plans to shift towards developing high-value steel products, in response to changes in material demand from major industries such as automobiles and shipbuilding. This is especially for high-manganese steel that can withstand cryogenic environments such as LNG and liquefied hydrogen storage tanks.
Lastly, South Korea will consider taking countermeasures to trade barriers and exports in efforts to boost steel exports, including consulting with the EU about its carbon border adjustment mechanism(CBAM) that levies a tax on imports with high carbon intensities. The country sees new steel demand from emerging markets such as the Middle East, India and the Asean countries, with plans to continue negotiations for free trade agreements.
Motie minister Lee Chang-yang also noted the importance of labour management in the steel industry, and expressed concern that some union law amendments under deliberation could result in business activity being affected by illegal strikes. "We will do our best to establish advanced labour-management relations that meet global standards," he said.
"The government is also planning to create a W150bn fund as part of an alliance to drive low-carbon steel production.
Motie signed an initial agreement with seven companies, including Posco and Hyundai Steel, on 16 February to encourage collaboration on low-carbon steel production to promote investment and technology development, as well as enhance global competitiveness of steel produced in South Korea.
The partners will form an alliance in this year's first quarter to achieve their goals and will create a W150bn fund for low-carbon steel production, after using up the W150bn environmental, social and governance (ESG) fund for steel. The ESG fund was created in June 2022.
These measures were in response to a "reorganisation of the global steel market" that is centered on low-carbon and high-value steel, Motie said. The emergence of new regulations such as CBAM has created a scenario where reducing carbon emissions boosts export competitiveness, the ministry added. The CBAM will take full effect from 2026 after a transition period later this year.
There is also continuing global oversupply, with "steel demand structure also facing a new phase due to the eco-friendly transition of downstream industries such as automobiles and shipbuilding", according to Motie.
Source:Argus Media
