South Korean steelmaker POSCO Holdings has announced plans to invest $14 billion in technologies to mitigate its environmental impact amid mounting pressure on the industry to cut its hefty greenhouse gas emissions.

The company plans to build two electric furnaces, one each at its Gwangyang and Pohang works, slated to start up in 2025 and 2027, respectively. These will replace the output of aging blast furnaces to be shut down.

POSCO so far has used electric furnaces for only certain products, such as stainless steel. Its blast furnaces -- eight in South Korea and one in Indonesia -- produce higher-quality steel, but with a much higher carbon footprint.

For these blast furnaces, POSCO will introduce new technology enabling coking coal to be swapped out for cleaner hydrogen. The technology will be developed in partnership with UK-based Primetals Technologies, part of the Mitsubishi Heavy Industries group. The two began design work last month with an eye toward adopting the new process at domestic furnaces by 2027.

Technologies refined at POSCO's South Korean steelworks could be incorporated into a second blast furnace to be built in Indonesia and one in India over the next five years. POSCO aims to cut its overall carbon dioxide emissions from 78.5Mt last year to 71Mt or less by 2030 while still expanding capacity.

"Environmental, social and governance measures are important to investors. This will be a positive for the stock."

Lee Hyun-soo, an analyst at Yuanta Securities

POSCO's plans will involve heavy upfront costs that could eat into profits at a company that has long excelled at keeping production costs low. The lower-carbon alternatives "may be less profitable than [conventional] blast furnaces in the short term," said Lee Hyun-soo, an analyst at Yuanta Securities.

The prospect of thinner margins is weighing on the steelmaker's shares now. But cutting emissions by 10% could eventually save POSCO an estimated 500 billion won a year by reducing future purchases of carbon credits.

And "environmental, social and governance measures are important to investors," Lee said. "This will be a positive for the stock."

Source: Nikkei Asia