Regional steel-making heartland has been given a $200 million handout to survive in an economy striving to cut carbon emissions.

Helping to clean up one of Australia’s most emissions-intensive industries, the first round under the federal Powering the Regions Fund will support BlueScope Steel in NSW and Liberty Steel in South Australia.

The investment in the steel sector is about securing the long-term future of the industry, with steel also essential for the energy transition, Energy and Climate Minister Chris Bowen said on Wednesday.

“Regions like the Illawarra and Whyalla have been industrial powerhouses for generations … and we want to see this continue,” he said at the Port Kembla steelworks.

BlueScope has been awarded $136.8 million to reline and upgrade of its No.6 Blast Furnace at Port Kembla, while maintaining domestic production, and will employ approximately 250 additional workers on site for the project.

BlueScope’s head of Australian steel products Tania Archibald said the grant would help to secure ongoing iron and steelmaking and job security in the Illawarra in NSW, and was an “essential bridge” for achieving net zero by 2050.

The Port Kembla steelworks underpins the nation’s sovereign capability in construction, energy, infrastructure and defence.

“Both we and the government recognise that BlueScope operates in an emissions-intensive, hard to abate sector,” she said.

Liberty has been allocated $63.2 million towards the purchase and commission of a low-carbon electric arc furnace to replace the existing traditional blast furnace at the Whyalla Steelworks.

For Liberty, the shift to green iron and steel will increase its workforce by almost a quarter over five years and will help provide retraining for a substantial number of workers.

Mr Bowen said total steel demand – increasingly green steel – for the energy transformation to 2050 would be almost five billion tonnes, accounting for three-quarters of the total material requirement.

“We want to make sure products vital to our economic future like green steel are made in Australia, but this will require innovation and new ways of processing iron ore that decarbonise our steel industry,” he said.

These grants are the first to be delivered under the fund through its Critical Inputs to Clean Energy Industries program, which supports high-polluting sectors.

Steel is vital for electricity transmission, wind towers, solar farms, the construction of energy-efficient buildings and housing and rail infrastructure.

“Clean, green Aussie made steel is the way of the future,” Minister for Industry Ed Husic said.

“Our economy needs it and it will sustain and create great jobs in our regions,” he said.

Some $200 million in grant funding has also been set aside for the emissions-intensive cement and lime and alumina and aluminium sectors, with recipients to be announced in the coming months.

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