A new report from the Institute for Energy Economics and Financial Analysis finds that steel-making companies are exploring replacing Australia and Russia’s increasingly expensive and supply-challenged pulverized coal injection coal with green hydrogen as an early pathway to reducing emissions in the steel industry. Report author IEEFA’s energy finance analyst Simon Nicholas says “Globally, the steel industry is exploring the potential for hydrogen while facing escalating coal prices. This is presenting challenges for the future of Australia’s PCI and coking coal, particularly with opportunities for hydrogen apparent in the short term in blast furnaces and longer-term in direct reduced iron processes.”A number of companies are already exploring the replacement of PCI coal with hydrogen:German conglomerate Thyssenkrupp started the first industrial-scale test of PCI coal replacement with hydrogen in 2019.Australia’s largest steelmaker BlueScope plans to replace PCI coal with coke oven gas, which contains 60% hydrogen, subsequently adding green hydrogen. The company aims to work with Australia’s Commonwealth Scientific and Industrial Research Organisation and Shell on pilot green hydrogen production projects.BHP, having indicated hydrogen will replace PCI coal in blast furnaces, is holding onto its hard coking coal assets and has started divesting mines that produce lower-quality metallurgical coal including PCI coal.Rio Tinto has highlighted that reducing carbon emissions from blast furnaces will require higher-grade iron ore and the replacement of PCI coal with hydrogen, echoing the view that PCI coal is facing an increasingly challenged future.PCI coal is essentially high-quality thermal coal which can be sold into metallurgical or thermal coal markets alike. It’s injected into historically dominant blast furnaces to reduce more expensive coking coal consumption. Australian PCI coal prices peaked at USD 645 per tonne in March 2022, briefly surpassing that of premium-quality hard coking coal, PCI coal is more usually priced 20%-30% lower. Even after coming off this extreme high, PCI coal was still at a very high USD 365 per tonne in early April.