Australia’s government has taken initial steps to support South Korean steelmaker Posco’s plan to invest $40bn in the country’s green hydrogen industry, and has described the Asian nation as an important partner in the energy transition.

On December 7, the world’s sixth-biggest steel producer announced it would invest $28bn in green hydrogen and $12bn in green steel with its local Australian partners by 2040. 

The group wants to combine green hydrogen with iron ore to produce low-emissions hot briquetted iron (HBI), which is used to make steel. Since April 2022 it has been conducting HBI feasibility studies with Australian miner Hancock Prospecting. Posco has also released plans to use Australia as a base to export hydrogen to South Korea.

While it is still early days, the Australia–Korea Business Council director Bill Paterson believes Posco is “deadly serious” about following through on its $40bn pledge — Australia’s second-biggest foreign direct investment (FDI) announcement on record, according to fDi Markets. “They're very conscious of the changing energy market globally and securing what they need,” said Mr Paterson, who is also Australia’s former ambassador to Korea and regularly meets with Posco executives. 

On January 6, Western Australia’s state government allocated Posco land in the north-west Pilbara region in an area designated as one of the country’s seven hydrogen industrial hubs. The month prior it committed to streamlining hydrogen project approvals, and on February 1 the state’s premier Mark McGowan struck a deal with South Korea’s government to collaborate in emerging industries including renewable hydrogen and ammonia.

Transformational investment

On top of Posco’s announcement, fDi Markets shows that foreign investors announced 15 other green hydrogen projects in Australia between 2019 and 2022, worth an estimated $3bn. James Bowen, a policy fellow at the think tank Perth USAsia Centre, believes that for Australia to reach its ambitions of becoming a clean hydrogen superpower, the country needs “some sort of transformational investment.”

While the US and EU are looking to support clean technologies via subsidies, Australia’s government “is generally not comfortable [making] big interventions in the market,” he said. “So there’s a real emphasis on getting that foreign capital into these projects” to improve clean hydrogen’s cost competitiveness, Mr Bowen added.

He sees South Korea becoming “one of the more significant players” in Australia’s hydrogen industry. Indeed, Posco joins two other Korean-led green hydrogen projects underway in Queensland.  

Last September, a consortium consisting of Hanwha Impact, SK Gas and Korea Zinc’s local subsidiary Ark Energy agreed to build three gigawatts of renewable energy to create and export one million tonnes of green ammonia per annum to Korea starting 2032. Ark energy is also constructing the SunHQ Hydrogen Hub in Townsville, which will power hydrogen fuel cell trucks transporting zinc from its refinery to the port.

A spokesperson for Australia’s Department of Industry, Science and Resources told fDi that “South Korea is an important partner in the energy transformation” and it “welcomes investment from South Korean partners” that support global decarbonisation.

Redrawing relationships

These projects underscore how Australia’s economic ties with South Korea — its third biggest export partner — is transitioning away from its historical base of iron ore, coal and natural gas. “We’re looking at a complete change in that relationship … to [one] based over time on hydrogen supply and critical minerals,” said Mr Paterson.

A 2022 report from Perth USAsia Centre states that the invest-to-export model, whereby South Korean resource buyers invested in Australian fossil fuel projects to secure offtake, is “propelling hydrogen cooperation today.” The Australian Renewable Energy Agency predicts that by 2040 demand for hydrogen exports could surpass three million tonnes per year, worth $10bn annually.

Posco’s Australia subsidiary declined to comment.