The development of hydrogen steelmaking in Japan still faces huge cost challenges, an official from the Japan External Trade Organization told Kallanish during the World Hydrogen MENA conference in Dubai this week.

The source said Japan is working towards a target of reducing greenhouse gas emissions by 46% from 2013 levels by 2030 and is committed to becoming carbon neutral by 2050. Although he is confident the set goals will be achieved by 2030, it is not clear whether the long-term goal of 2050 can be achieved on time.

This is mainly because achieving carbon neutrality is not just an industry matter, it involves the coordinated operation of the upstream and downstream industrial chains. When Japanese steel producers consider producing and selling low-emission steel or green steel, it remains uncertain whether downstream industrial buyers or end-user consumers will accept the corresponding "green premium". The source admitted that the Japanese government has no clear vision for the "green premium" and is looking for an accurate way to price it, but there has been no significant progress so far.

Producing green steel in Japan is inevitable, the source said. The process of developing hydrogen metallurgy will however still take time as Japanese steelmakers see hydrogen costs exceeding expectations and are waiting for hydrogen prices to fall. For Japan, almost 100% of its hydrogen requirement needs to be imported. "This will be unchanged at least until 2030," he noted. There is a possibility of local production of direct reduced iron in Japan, but this will also take time to develop, he added.

Instead, Japanese steelmakers are considering to produce green steel in areas with rich and cheap energy, to sell to Europe or Asia. He mentioned JFE's cooperation with Emirates Steel Arkan in the United Arab Emirates to carry out feasibility studies into establishing a green metallics supply chain (see Kallanish passim).

In addition, he revealed that Japanese steelmakers are also setting their sights on Saudi Arabia to seek cooperation with local companies for the production of steelmaking raw materials and green steel.

He believes carbon allowance trading should be introduced into the steel industry. The Japanese government established Japan's emission trading scheme (ETS) to introduce carbon allowance trading to Japan. But in the initial phase till 2026, companies are allowed to voluntarily participate in the ETS and voluntarily propose their own emission reduction targets. The government will first require the power generation industry to trade before extending coverage to the steel industry.