Carbon neutrality puts a heavy burden on POSCO

The POSCO cost of replacing one blast furnace with a carbon-free one by 2050 is estimated at approximately six trillion won. The company currently operates nine blast furnaces and has an estimated total replacement cost equivalent to its 30-year operating profit.

The South Korean government recently met with steel producers and the Korea Iron and Steel Association to discuss how to achieve decarbonization. They focused on replacing current production processes based on iron ore and coal in large blast furnaces with hydrogen recovery based steelmaking, which uses hydrogen and oxygen instead of coal to reduce carbon emissions by 25 percent and greenhouse gases by 50 percent. ... ...

The problem is cost. According to POSCO, the cost of replacing a blast furnace with hydrogen recovery and renewable energy will be 5.9 trillion won per blast furnace, including an estimated one trillion won sunk costs associated with shutting down before its end of life.

In other words, the total cost would be 53.1 trillion won for a company that recorded an operating profit of 2.403 billion won in 2020, and the company will only be able to change processes if it spends most of the profit for these purposes, which means POSCO will not can do it alone.

Others using blast furnaces, such as Hyundai Steel, are not doing so badly. According to industry sources, they will need 110 trillion won to implement hydrogen-based electric furnaces. For reference, POSCO emitted 81.48 million tonnes of carbon in 2019 and Hyundai Steel 22.24 million tonnes of carbon, while their emissions accounted for 21.5 percent of the 500 largest companies.