- Reports suggest mass production plans at Gwangyang yet to be established
- K-Steel Act gives no definition of low-CO2 steel product, premium on green steel
It has been two and a half months since the completion of POSCO’s Gwangyang Steelworks electric furnace. With an annual production capacity of 2.5 million tonnes (mnt) and an investment of KRW 600 billion, it is the largest single electric furnace in South Korea and ranks among the world’s largest.
However, there is still no news that this facility is operating at its full capacity. There are even reports that concrete mass production plans have not yet been established.
The survival of the steel industry depends on carbon neutrality, and POSCO is developing hydrogen reduction steelmaking. To meet the government’s carbon neutrality schedule during this long journey, POSCO has chosen a bridge technology utilising electric furnaces. The concept is to produce steel products with reduced carbon emissions by pouring molten steel from an electric furnace, which generates less carbon, into a converter and combining it with molten iron from a blast furnace.
The electric furnace that began operations in Gwangyang last June serves as the starting point. However, a situation has arisen where the facility is completed but there are no orders to fill it.
Hyundai Steel, which has adopted the same bridge technology, is no different. Last February, it announced that it had started mass production of carbon-reducing steel sheets by operating the world’s first electric furnace-blast furnace combined process, and stated that it had completed certification for 25 steel grades and would expand that number to 53 by the end of the year. At the core of this is Hi-Cube, which is based on the bridge technology of the electric furnace combined process.
However, there are rumors that Hyundai Steel is also struggling with the operation of its electric furnaces.
Cost burden too heavy
The production costs of low-carbon steel products are inevitably high. Iron scrap, the raw material for electric furnaces, is more expensive than iron ore, and electricity, the heat source, is also more expensive than the coal used by blast furnaces. Since expensive raw materials and fuel are used, it is only natural that the price of molten iron rises. On top of this, refining costs also increase because more impurities must be filtered out during the refining process.
Ultimately, whether the carbon-neutral electric furnace operates depends on who bears the increased costs.
Carbon neutrality is being driven by governments around the world, generally through the imposition of penalties. However, as major governments postpone or relax their carbon neutrality schedules citing economic downturns, the creation of demand for low-carbon steel products is being delayed. This has resulted in a structure where only “well-intentioned companies” that installed facilities and prepared in accordance with government schedules are suffering the consequences.
The cost of the operational delay does not end with increased costs for the two companies. The greater damage is the collapse of trust in the policy. If a precedent is built where companies that trusted the government and acted first end up suffering losses, no one will take the lead in the next transition.
The core of the K-Steel Act lies in carbon neutrality. The intention is for Korean steel companies to lead the way in carbon neutrality to maintain their competitiveness. However, as time passes since the law was implemented, expectations have actually faded. Recently, this has even led to doubts about its effectiveness. This is evidence that trust in government policy is weakening, at least when it comes to carbon neutrality.
Will the government step in?
Demand for low-carbon steel products will increase over time. For that demand to actually rise and for carbon neutrality to proceed according to schedule, the government must demonstrate its commitment.
The first priority is to fill the legal gaps as soon as possible. The K-Steel Act serves as the framework. While the framework has been established through the passage of the bill, there are many gaps because the focus was solely on drafting the law. Now, we must add concrete details to that framework. Although the legal basis for low-carbon steel product certification has been established, the law still lacks provisions defining what constitutes a low-carbon steel product and what premiums will be applied to them.
The second step is for the government to actively purchase low-carbon steel products. A mandatory usage ratio for low-carbon steel products should be established in public procurement. Furthermore, similar to electric vehicle subsidies, it is worth considering a plan to provide subsidies for a certain period to support private sector demand for low-carbon steel products.
The steel company has done its part. It has completed the facilities and secured the technology. It is also producing products to be certified one after another.
The remaining blanks lie in the law and the market. They concern specific legislation to increase the use of low-carbon steel and who will pay the price for it.
As long as those two compartments remain empty, the electric furnace will continue to stand still, and corporate confidence in government policies will cool down accordingly.
Note The article is published as part of a content sharing agreement between SteelDaily and BigMint
Leave a Reply