DOI: 10.22982/NEXTRP.2024.10.15

Executive Summary 

Net-Zero Roadmap for Korean Steel Industry (Korea Net-Zero Steel Roadmap) (hereinafter referred to as “K-NZS 1”), a report that NEXT group published in the summer of 2023, offered the most ambitious carbon reduction pathway ever proposed in South Korea, but the roadmap had limitations. It failed to align with the global goal of curbing the average temperature rise to within 1.5℃. This year, 2024, NEXT group publishes this report, Korea Net-Zero Steel Roadmap II (“K-NZS 2”), to revisit the analysis conducted by K-NZS 1 and present recommendations compatible with a 1.5℃ pathway. The new recommendations incorporate internal and external environmental changes including (i) the rapid growth of demand for green steel and (ii) the potential delays in supply of green hydrogen worldwide. 

South Korea’s current steel decarbonization strategy lacks short- to mid-term carbon reduction solutions, and the reliance on blast furnaces is expected to persist until the commercialization of hydrogen reduction technology.

The South Korean government and steel industry in 2024 are focusing their carbon neutrality strategy primarily on (1) securing reliable supplies of steel scrap and (2) developing carbon reduction technologies, such as hydrogen reduction technology and carbon capture. While the government’s robust R&D support for steel decarbonization is commendable, there remains a gap in immediate support for deploying new technologies that can be applied in the short term. 

In 2021, the South Korean steel industry declared its ambition for carbon neutrality. Despite this, the industry has continued to reline existing blast furnaces (BFs). Expressed differently, the steel industry has one foot anchored in the past in that it is continuing to invest in the status quo. Unless production is scaled down, emissions are likely to remain largely unchanged for the next 10-15 years. 

The increase in demand for green steel and potential delays in green hydrogen supply suggest that South Korea’s steel decarbonization strategy be reassessed.  

Global demand for green steel is expected to soar to over 200 million tonnes by 2030, 10% of the entire steel market. Given South Korea’s strong presence in the global market—accounting for 3.5% of crude steel production and 7.2% of steel exports—the burgeoning green steel market is too important to overlook. 

Another issue has been global inflation: it has been causing delays in funding for hydrogen projects and the implementation of support policies. The path to hydrogen transportation is also beset with technical problems. Even with the perfection of hydrogen reduction technology, the potential for disruptions in steel production due to delays in hydrogen supply cannot be ruled out. 

The surging green steel demand and potential delays in green hydrogen supply suggest that South Korea’s steel decarbonization strategy be reassessed on two fronts. Firstly, the country cannot afford to passively wait for the commercialization and scale-up of hydrogen reduction, which is expected for the early part of the 2030s, given the absence of short- to medium-term interim solutions to meet immediate demand for green steel, which is expected to surge by 2030. Secondly, the country’s reliance on traditional steel making practices may persist for an extended period without feasible decarbonization alternatives, especially since delays in green hydrogen supply could decelerate the deployment of hydrogen reduction technology 

K-NZS 2 proposes 1.5℃-compliant scenarios with more powerful short- and mid-term solutions. 

K-NZS 2 sets forth three scenarios: Target, Base, and Delayed Hydrogen Supply. The Target Scenario aims for the fastest possible decarbonization, adhering to the strictest standards of the 1.5℃ carbon budget for South Korea’s steel industry—pegged at the 50th percentile. The Base Scenario opts for a more lenient stance in the interpretation of the carbon budget, anchored at the 33rd percentile of the 1.5℃ carbon budget. The Delayed Hydrogen Supply Scenario anticipates a five-year delay in the domestic supply of hydrogen.

< Contents > 

Executive Summary

Ⅰ. Evolving Global Context for Steel Decarbonization in Korea

1. Surging Demand for Green Steel 
2. Potential Delays in Green Hydrogen Supply 
3. Need to Reassess South Korea’s Steel Decarbonization Strategy

Ⅱ. 1.5°C-Compliant Net-Zero Steel Roadmap for South Korea

1. Scenario Designs
2. Scenario Analysis Results
3. Scenario Comparison Overview and Implications

Annex. Key Assumptions for Cost Analysis​