South Korea’s largest steel maker Posco Holdings this week opened a new pilot steel production plant fuelled by hydrogen instead of the fossil fuels commonly used today, as the company moves towards its goal of achieving carbon neutrality.

The pilot plant, located in Pohang, uses a process called hydrogen reduction (HyREX) which, the company said, "dramatically" reduces carbon emissions in the steel production process.

The pilot facility has a production capacity of up to 24 tons of molten iron per day emitting 400kg of carbon per ton, much lower than existing coal or natural gas fired steel plants in operation today. The company expects the facility will be carbon free once it switches to renewable energy.

The global steel industry is a major emitter of carbon dioxide which is produced when fossil fuels such as coal and natural gas react chemically with iron ore. The company sees hydrogen, which produces water, as the only alternative to fossil fuels to cut emissions.

Senior vice president in charge of the HyREX project, Bae Jin-Chan, said in a statement: “HyREX will change 3,000 years of steel making history. We see carbon neutrality as an opportunity in the steel sector rather than a barrier."

Posco plans to begin construction in early 2025 of a full scale HyREX steel plant with a production capacity of 36 tons per hour, with completion scheduled by 2027.

The company plans to produce 2.5m tons of steel annually using this process by 2040 and aims to switch entirely to hydrogen powered steel plants by 2050.