What’s next for Japanese companies? POSCO leads the way in green iron investment
Western Australia has announced AUD 34 million in grants for three decarbonisation-related mining projects under its Investment Attraction Fund. One of the key recipients is the Port Hedland Iron Project, a joint initiative between South Korean steel giant POSCO and Australian company Port Hedland Iron, which will receive AUD15 million. The project aims to produce hot briquetted iron (HBI, a compressed form of direct reduced iron) for export to South Korea, where it will be used in steelmaking.
Analysis is increasingly showing that integrating transported green iron in steelmakers’ decarbonisation pathways will accelerate the transition to the near-zero DRI-based ironmaking and make it cost effective. Countries like Japan and South Korea currently import iron ore, and can avoid the cost and difficulty of hydrogen transport by moving ironmaking to regions with iron ore and abundant renewable energy resources. SteelWatch notes that importing just the green iron briquettes will result in almost 75% less material being shipped than importing hydrogen and iron ore separately.¹
POSCO has been making strategic investments in green iron production in Australia, and this grant is part of that broader effort. The company is considering a major green iron project in Port Hedland, with an estimated total investment of up to AUD 27 billion. Ultimately, POSCO aims to produce 12 million tonnes of HBI annually. This is not just a one-off project, it’s a long-term move aligned with market trends and policy developments.
However, the project also comes with challenges. Under the current plan, LNG (liquefied natural gas) will be used in the reduction process for HBI green iron production, with a transition to green hydrogen planned for the future. This has sparked debate, with questions about whether natural gas is acceptable as a short-term solution and whether POSCO will genuinely follow through with the shift to green hydrogen.
POSCO’s bold investment strategy also raises questions for the Japanese steel industry. While companies like Nippon Steel talk about their commitment to decarbonisation technologies, actual investments remain limited. However, market trends suggest that developing technology alone is no longer enough, concrete investment and near-term deployment is now essential. As South Korea’s leading steelmaker capitalises on Australian government support to gain a strategic edge, Japanese companies need to take decisive action to advance their own projects. There are additional investment-ready opportunities on green iron in South Australia and beyond.
The global steel industry is entering a new phase of intensified investment in decarbonisation. With Australia and South Korea already moving forward, the key question is what will Japanese companies do next? All eyes are on their next move.
Notes:
- A direct reduced iron (DRI) plant producing 2.5 mtpa requires around 135,000 tonnes of green hydrogen and 3.6 million tonnes of iron ore pellets. Transport volume is calculated assuming green iron is transported as HBI, and hydrogen is transported as liquid hydrogen, and based on densities as follows: HBI density of 2.5-3.3 tonnes / m3; iron ore density of 2.2 tonnes / m3 of iron ore pellets; liquid hydrogen, with density of 0.07 tonne / m3. Importing both hydrogen and iron ore to the DRI plant thus requires 3.5 million cubic metres of hydrogen and iron ore to be imported. By comparison shipping 2.5 million tonnes of HBI requires 0.75 – 1 million cubic metres of volume. It therefore takes an estimated 3.5 – 4.7 times more transport capacity to ship both the hydrogen and the ore, than it does just shipping DRI in hot briquetted iron (HBI) form. SteelWatch calculation, 2025.
