The University of Wollongong and BlueScope Steel have announced a $45 million research partnership to develop hydrogen-based steelmaking processes that could dramatically reduce carbon emissions from one of Australia’s most carbon-intensive industries.

The collaboration will establish a pilot plant at BlueScope’s Port Kembla steelworks testing direct reduced iron (DRI) technology using hydrogen instead of coal or natural gas as the reducing agent. If successful, the approach could eliminate most emissions from primary steel production.

Steelmaking currently accounts for about 7-9% of global carbon emissions. The conventional process uses blast furnaces where coke (refined coal) reduces iron ore to metallic iron. This process inherently produces CO2 because carbon removes oxygen from iron oxide, forming carbon dioxide as a byproduct.

Hydrogen-based steelmaking avoids this by using hydrogen to reduce iron ore, producing water vapour instead of CO2. The concept isn’t new, but making it economically competitive with conventional steelmaking has proven challenging.

Professor Veena Sahajwalla, who directs Wollongong’s Centre for Sustainable Materials Research and Technology, said the partnership reflects growing urgency around decarbonising heavy industry. “Steel is essential for modern economies, but we need to produce it without destroying the climate. Hydrogen-based processes offer a pathway, but they require significant engineering development.”

BlueScope operates one of Australia’s two remaining integrated steelworks at Port Kembla. The facility produces about three million tonnes of steel annually, mostly for Australian construction and manufacturing. It’s also a major employer in the Illawarra region south of Sydney.

The steelworks faces long-term questions about its viability. Carbon pricing, emission regulations, and competition from low-cost producers using modern efficient plants create pressures. Developing lower-emission production methods is essential for long-term competitiveness.

The DRI process uses shaft furnaces where iron ore and hydrogen react at temperatures around 800-900°C, lower than blast furnaces’ 1,500°C+ temperatures. The reduced iron is then melted in electric arc furnaces to produce steel.

This two-stage process is more flexible than conventional integrated steelmaking. It can use renewable electricity for the arc furnace, and hydrogen can be produced from renewable electricity through electrolysis. That means the entire process could potentially run on renewable energy.

Several companies globally are developing hydrogen steelmaking, including SSAB in Sweden and ThyssenKrupp in Germany. But most projects target green-field facilities built from scratch. Adapting existing steelworks is more challenging but necessary if you want to preserve employment and capital assets.

The Port Kembla pilot plant will be relatively small, processing about 50,000 tonnes of iron ore annually. That’s enough to prove the technology and identify engineering challenges but well short of commercial scale.

Key questions include reactor design for efficient hydrogen utilisation, handling of impurities in Australian iron ores that might interfere with reduction kinetics, and integration with existing steelmaking infrastructure.

Australian iron ore, particularly from the Pilbara region in Western Australia, is high-quality hematite ideal for blast furnaces. But DRI works best with magnetite ore, which has different chemical and physical properties. The research will explore whether processing methods can be adapted or whether ore blending is necessary.

Hydrogen supply is another consideration. The pilot plant will initially use hydrogen produced from natural gas with carbon capture, but commercial-scale operations would need massive hydrogen volumes, likely produced onsite using electrolysers powered by renewable energy.

That requires substantial renewable generation capacity. Producing one tonne of steel via DRI requires roughly 50-70 kilograms of hydrogen, which requires about 1,800-2,500 kilowatt-hours of electricity to produce through electrolysis. For three million tonnes of annual steel production, that’s about 5,000-7,000 gigawatt-hours per year, equivalent to a large wind farm or solar installation.

Whether dedicating that much renewable generation to steelmaking makes sense depends on broader energy system planning and decarbonisation priorities. Some argue that available renewable energy should displace fossil electricity generation first, with industrial applications coming later.

The partnership includes research on ore processing, reactor design, process control, and materials handling. Graduate students and postdocs from Wollongong will work alongside BlueScope engineers, creating training pathways for the next generation of metallurgical engineers.

That’s valuable because Australia’s steel industry has shrunk over the past decades, and engineering expertise in steel production has declined. Rebuilding that capability requires both research programs and industry partnerships.

The project received $15 million in federal funding through the Modern Manufacturing Initiative, which supports innovation in priority manufacturing sectors. The remaining $30 million comes from BlueScope and the university.

Commercial deployment would require much larger investments, probably $2-3 billion to convert Port Kembla to hydrogen-based production. Whether BlueScope makes that investment depends on carbon pricing policies, availability of low-cost hydrogen, and global steel market conditions.

International trade rules for carbon-intensive products are evolving. The European Union is implementing carbon border adjustments that will effectively tax imports of steel and other products based on production emissions. Australia is considering similar measures.

Those policies could make low-emission steel production economically attractive even if production costs are initially higher than conventional methods. High-emission steel might face trade barriers or carbon costs that erode price advantages.

Whether hydrogen steelmaking achieves widespread adoption globally will significantly influence Australia’s iron ore industry. If steel producers move toward DRI processes using hydrogen, that increases demand for high-quality iron ore suitable for direct reduction, where Australian ores could have advantages.

Conversely, if carbon capture and storage (CCS) on conventional blast furnaces becomes the preferred decarbonisation pathway, demand for coking coal might persist longer, benefiting Australian coal producers at least in the medium term.

These competing technology pathways create uncertainty for investment and policy decisions. The Wollongong-BlueScope research helps Australia maintain options and participate in technology development rather than waiting to see which pathway other countries choose.

The pilot plant is scheduled to begin operations in late 2026, with results available by 2028. Decisions about commercial-scale deployment would likely follow, probably in the early 2030s.