China has launched a new hydrogen pilot program with a strong focus on reducing carbon emission in the steel industry. In March, three government ministries announced incentives for five urban clusters to advance hydrogen-related goals, including introducing low-carbon hydrogen into steel making processes.
This initiative is an upgraded version of a 2021 program that originally focused on hydrogen fuel cells for transportation. The new policy broadens hydrogen applications to cover metallurgy, green ammonia, methanol, shipping, and aviation. Total funding stands at approximately $1.2 billion over four years — significantly lower than $4.71 billion China invested in electric vehicles between 2016 and 2020.
The primary objective is to reduce hydrogen prices for end users from the current 40–50 yuan/kg ($6-7) to 30 yuan/kg ($4) by 2030, and as low as 15 yuan/kg ($2) in renewable-energy-rich regions. However, for hydrogen-based steelmaking to be economically viable, prices need to reach 10–15 yuan/kg ($1.5-2) — a target that has not yet been achieved.
On the industry front, Baowu Steel — the world’s largest steel producer — launched a hydrogen-electric arc furnace with one million ton annual capacity in late 2025 and announced an 11.9 billion yuan ($1.8 billion) hydrogen hub at Yangjiang. HBIS in Hebei Province is also operating a hydrogen-based steelmaking facility.
Despite these advances, coal-fired blast furnaces still account for around 90% of China’s steel output and contribute roughly 15% of national COâ‚‚ emissions. Experts describe the program as a catalyst rather than a full-scale commercial transition, noting that real progress will depend on both lower hydrogen costs and growing domestic demand for green steel.
