The government is seeking ways to accelerate the commercialization of hydrogen-based direct reduction ironmaking technology by supplying hydrogen to POSCO at a lower price.
It is seen as a move to support the steel industry's transition to hydrogen, reduce greenhouse gas emissions to meet President Lee Jae-myung's pledge, and bolster industrial competitiveness.
According to the steel industry on the 23rd, the Ministry of Climate, Energy and Environment is preparing a plan to supply hydrogen, which exceeds 10,000 won per kilogram, to POSCO's hydrogen-based direct reduction pilot project at up to one-quarter the price.
Environment Minister Kim Seong-hwan also attended World Hydrogen Expo (WHE) 2025 held in Goyang, Gyeonggi, earlier this month and conveyed this view to related industries.
Given that the annual production capacity of the hydrogen-based direct reduction pilot facility POSCO is pursuing is 300,000 tons (t), the amount of hydrogen the government would supply to POSCO is estimated at about 27,000 t per year.
According to the Korea Iron & Steel Association, the hydrogen-based direct reduction process requires about 90 kilograms of hydrogen as a reducing agent to produce 1 ton (t) of pig iron (銑鐵·iron produced by reducing iron ore).
POSCO aims to commercialize the technology by 2030 by operating its HyREX hydrogen-based direct reduction pilot facility starting in 2028.
The government intends to supply the necessary hydrogen at low cost to verify the technology's economic feasibility and accelerate the steel industry's transition to hydrogen.
The steel industry believes hydrogen must be supplied at $2 or less per kilogram (about 2,959 won) for the switch to hydrogen-based direct reduction to be economical.
If POSCO receives hydrogen from the government at one-quarter the price, it would effectively receive support worth about 200 billion won per year based on the current hydrogen price.
The government is pushing the steel industry's transition to hydrogen because the sector's greenhouse gas emissions account for 15% of total emissions.
Coal is currently used to make steel. As a result, 97.71 million tCO2eq (tons of carbon dioxide equivalent) of greenhouse gases are emitted annually. That represents 40% of greenhouse gas emissions from the industrial sector.
Reducing greenhouse gas emissions from the steel industry is also critical to achieving President Lee Jae-myung's campaign pledge to cut emissions 50% by 2030. The government recently finalized a plan to reduce emissions by up to 61% by 2035 compared to 2018.
The United States and Europe are supporting the hydrogen industry through tax credits and direct capital investment. The United States provides a tax credit of up to $3 per kilogram for clean hydrogen production or supports 30% of facility investment costs.
Europe plans to invest €12.3 billion (about 21 trillion won) to build a clean hydrogen technology value chain, convert carbon-intensive industries such as steel to hydrogen, and fund water electrolysis facilities and mobility deployment.
An Environment Ministry official said, "It is under discussion and nothing has been decided yet."