BlueScope says "green steel" technologies aren't yet fully commercially viable, and may not be until the 2040s.
Therefore, the steelmaker is looking at options to upgrade its Port Kembla steelworks.
The company says the most likely option will be to spend $700 million to $800 million on a reline of the No.6 blast furnace.
The announcement came on Monday as BlueScope released its half-year financial results for the six months ending December 31.
BlueScope says its net profit rose 78 per cent to $330 million in the six months.
This was aided by greater Australian demand for steel products as residential construction grew and a shift to regional centres created additional demand.
"We have seen strong volumes and improving steel spreads in our largest steelmaking business in Australia and the US," managing director and CEO Mark Vassella said.
"Australian Steel Products' domestic despatches were the highest in a decade, driven by a resurgent residential construction sector."
According to the company, BlueScope is considering options for the future configuration of the Port Kembla steelworks, once the No.5 blast furnace comes to the end of its current operating campaign, which is expected to occur in the late 2020s.
However, they say given the critical nature of iron making to the Port Kembla operations, to safe-guard supply, an alternate source of iron may need to be available from 2026.
BlueScope says their initial focus is on the option to reline the "currently mothballed" No.6 blast furnace.
Mr Vassella said with the No.5 blast furnace due to reach the end of its lifespan, it would then be mothballed because the company wouldn't run both blast furnaces together at the site.
"Emerging 'green steel' technologies, while promising, are not yet ready for large scale implementation in the timeframes required," the company said in its report.
"In addition, alternative established lower carbon technologies such as electric-arc furnace steelmaking are not economically viable for large scale flat steel production in Australia at this time, given Australia's high cost of energy and due to insufficient availability of cost-effective, quality scrap steel to support three million tonnes of flat steel production at Port Kembla.
"At this point, a reline is likely to be the most technically feasible and economically attractive option for Australian steelmaking while longer-term breakthrough low-emission technologies are developed."
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