1. Inside a steel mill in northern China, hydrogen-rich gas is pumped through a 120-meter-tall furnace to strip oxygen from iron ore, replacing the carbon-intensive step in conventional steelmaking. [para. 1] The plant, operated by HBIS Group's Zhangxuan Tech in Hebei, is one of the world's most advanced industrial-scale hydrogen metallurgy experiments. Its first 600,000-ton line began in December 2022, reaching stable production six months later, and claims a 70%+ carbon emission cut versus blast furnaces. [para. 2]
2. China is racing to replace coal with hydrogen, scrap, and renewables in the steel sector. [para. 3] The Zhangjiakou plant currently uses cheaper hydrogen-rich coke-oven gas rather than green hydrogen. A 2024 trial injected green hydrogen but it wasn't adopted due to high costs. [para. 4][para. 5] Steel accounts for ~15% of China's emissions, with ~90% of production still using long-process (coal/coke) methods. [para. 6] Output peaked at 1.065 billion tons in 2020 and declined to 0.96 billion tons recently. [para. 7][para. 8]
3. Producers pursue multiple paths: better blast furnace efficiency, more scrap in electric-arc furnaces (EAFs), and hydrogen/CCS experiments. [para. 9] The core challenge is the business model—how to share costs, risks, and the green premium—not the technology itself. [para. 10]
4. Steelmakers have little cash. Core business profits fell 40% to 16.7 billion yuan in H1 2026, with average margins at 0.77%. [para. 12][para. 13] A three-year efficiency program covered >70% of capacity, cutting energy costs by 29 yuan/ton with a 3.27-year payback. But easy cuts have been exhausted; disruptive changes are needed. [para. 15][para. 16]
5. EAF steelmaking is the most mature alternative, emitting 0.4-0.6 tons CO2 per ton vs 1.8-2.2 tons for long-process. [para. 18] Beijing aimed for 15% EAF share by 2025 and 20% by 2030, but only reached ~10%, well below the 30% global average. [para. 19][para. 20] Economics is the obstacle: EAF costs 300-600 yuan more per ton due to scarce scrap and electricity costs. [para. 21]
6. Hydrogen can eliminate more emissions. Baosteel's Zhanjiang unit completed a million-ton project in late 2025, designed for 1M tons of DRI and 1.8M tons of slabs, cutting emissions 50-80%. [para. 24] The investment is massive—over 5 billion yuan for Baosteel's facility. [para. 25] Operating costs are tighter: coke-oven gas costs 12-15 yuan/kg, half the price of green hydrogen, making the current process only 200-500 yuan more per ton. [para. 27][para. 28] Nationwide hydrogen costs averaged 26.2 yuan/kg production-side and 44.5 yuan/kg for users. HBIS said deployment would rise if delivered hydrogen fell to 15 yuan/kg. [para. 28][para. 29]
7. Hydrogen metallurgy may not be competitive for 10-15 years. [para. 30] China already has >7 million tons of hydrogen-based DRI capacity, but that's tiny against the ~1 billion-ton industry. [para. 31][para. 32] The issue is global—European, North American, and Australian hydrogen-steel projects have slowed. [para. 33] It's a gap between technical and commercial feasibility. [para. 34]
8. China's carbon market could help. Steel entered the national ETS in 2025. [para. 36] At a carbon price of ~90 yuan/ton, a conventional producer faces ~180 yuan per ton, but free allowances mean actual costs are low, failing to offset the 300+ yuan EAF disadvantage. [para. 37][para. 38] If prices exceed 150 yuan/ton and allowances shrink, EAF becomes competitive. [para. 39]
9. Another missing piece is buyer willingness to pay. Europe has green-steel agreements with automakers; China lacks a mature green-premium market. [para. 40][para. 41] Chinese producers are pursuing multiple technologies simultaneously. [para. 42] The 2030-2035 period is a crucial window; investing too early in the wrong process could lock in costly assets for decades. [para. 43][para. 44]
AI generated, for reference only
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