Hydrogen-Enriched Direct Reduced Iron (H2-DRI) and Underground Coal Gasification: Decarbonization Pathways in Northern China's Heavy Industrial Clusters

• HBIS Xuansteel's H2-DRI pilot achieves 60% H2 injection but suffers a 12% yield loss due to pellet sticking; supplemental electrical heating adds $15/tsteel to energy costs. • UCG syngas from deep-seam coal gasification in Shanxi costs $0.35/Nm3, enabling a DRI production cost of $380/tsteel with 90% CCUS, undercutting green H2-DRI by $40/tsteel. • CBAM's $90/tCO2 levy on steel imports would add $162/tsteel to BF-BOF exports, erasing the current $50/tsteel cost advantage over H2-DRI routes. • Levelized cost of hydrogen (LCOH) must fall to $1.80/kg for 100% green H2-DRI to achieve cost parity with syngas-UCG DRI; current electrolytic hydrogen in China costs $3.50/kg. • Capital replacement cycles: BF-BOF plants have 20-25 year lifespans, but retrofitting with H2-DRI requires $250/tsteel capex, versus $400/tsteel for greenfield H2-DRI, making brownfield conversion the near-term priority.