BlueScope has received planning approval for upgrades to three berths, to enable the steelmaker to import coal from Queensland.
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The steelmaker's traditional source of coal, the Dendrobium mine, will run until at least 2028, however South32 CEO Graham Kerr previously said he hopes the mine will continue to operate into the 2030s.
BlueScope will continue to source coal from the Picton, Tahmoor and Appin collieries.
The sign off from planning minister and member for Wollongong Paul Scully will open the door to the $182 million investment, which will see the current project team grow from 30 people to 100 during construction.
Work on site is expected to begin in early 2024.
General manager of manufacturing at Australian Steel Products Dave Scott said the upgraded berths - which have been in their current state for over 50 years - will future-proof the steelworks.
"It provides additional capacity in the event that we need volumes of coal or additional materials for lower emissions steel-making technology, for instance, larger volumes of scrap and potentially biochar into the future," he said.
The upgrades will involve the installation of a continuous ship unloader to get the coal and other materials off the ship and into a storage area for coke making.
Mr Scully said the approvals ensured that steel making could continue in the Illawarra, with the government hoping to increase the amount of local steel in major projects.
"We want to make sure that we are building that manufacturing future in NSW, this today is part and parcel of making sure that we can achieve that," he said.
Prior to the election, Labor committed to increasing the amount of local steel through upping tender weightings for local content to 30 per cent in large government projects, mandating 50 per cent local content in new train fleets and requiring local steel to make up 90 per cent of transmission infrastructure.
Mr Scully said the government was yet to put these promises into law.
"We're working through the process now of amending procurement laws and rules," he said.
"We believe that we can get there in this term of government, but it's going to take all elements of the supply chain."
Mr Scully would not be drawn on what impact additional costs from local steel would have on government tendering decisions.
Earlier this week, BlueScope announced its steelworks in New Zealand would be entirely run on renewable electricity, by replacing the existing coal-fired steelmaking process with an electric arc furnace.
The project is jointly funded by BlueScope and the New Zealand government, with each tupping in $160 million and $140 million respectively.
"Investing in an EAF makes sense when there's a reliable and affordable supply of both firmed renewable energy and domestic scrap steel, along with the right public policy settings and support," BlueScope CEO Mark Vassella said.
"That's what we see in New Zealand and that's why we are very pleased to progress this significant decarbonisation project."
Mr Scott said a similar switch to electrical steel making was not possible in Australia - hence the decision to expand the coal import facilities.
"In terms of what we make here, we're talking 3.2 million tonnes, we don't have the volume of scrap to support that here," he said.
Instead, BlueScope is working with Rio Tinto to update the iron ore imported for direct reduced iron - which would be turned into steel through a hydrogen-powered blast furnace in Port Kembla.
"We need to be able to secure our business here in Australia, and the blast furnace is an important bridge in between where we are now, and where we are in the future when that low-emission steel making technology becomes commercially available," Mr Scott said.
But, just as in New Zealand, and in South Australia, any change comes with a hefty price tag.
"The challenge to decarbonise is that it is an expensive process, and it has to have the government regulation and support to facilitate that," Mr Scott said.
"We at BlueScope look to have lots of ongoing dialogue and engagement with government at all levels to ensure that we work as partners in that transition."
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