POSCO [5490:KS], the world’s fifth-largest steelmaker, plans to build two mini mills featuring low carbon emissions and high utilization rate by 2027, as reported by Korean Economic Daily on December 20. The two mini mills will use electric arc furnaces (EAF) to produce high-quality steel sheets from hot briquetted iron (HBI), while conventional steelmaking adopts iron or scraps as raw materials. POSCO expects to construct one mini mill in 2025 and another in 2027, with an annual capacity of 800,000 to 1m tons each. Earlier this month, the South Korean enterprise approved a plan to spin off its steelmaking business. It plans to establish a separate unlisted entity in March 2022 to take over the separated business and focus on manufacturing green steel.
EAF contributed 523m tons of steel output in 2019, representing 28% of the global total. EAF can reduce about 75% of the carbon emissions compared with blast furnaces to produce steel. Therefore, it is increasingly popular with steelmakers amid carbon reduction campaigns. POSCO uses HBI in EAF steelmaking partially because it produces lower residual element content than using scraps as raw materials, which is crucial to the production of high-purity steel. In addition, the price for scraps has hit USD503.5 per ton, a record high from 2008. However, mini mills have been saddled with high power spendings and low productivity, raising concerns about the feasibility and sustainability of the project. Reportedly, POSCO is seeking collaborations with an Australian iron ore mine to jointly establish a plant producing 2m tons of HBI per year. Roy Hill Mine, in which POSCO holds a 12.5% equity, is considered as a potential partner.