The steel sector is a significant contributor to global carbon emissions, and decarbonization efforts are crucial to meet climate targets. Hydrogen-based direct reduced iron (H2-DRI) technology shows promise in reducing carbon emissions in the steel sector by utilizing hydrogen to directly reduce iron ore. Green hydrogen, produced from renewable sources, is essential for enabling low-carbon steel production through H2-DRI. However, challenges exist in the spatial distribution of renewable energy resources, necessitating on-site hydrogen production near steel units. Water consumption for renewable energy and hydrogen production in H2-DRI poses trade-offs between carbon reduction and water usage, especially in regions with limited water resources. The article proposes deployment schemes for H2-DRI in China's steel sector, focusing on the spatial matching of renewable energy supply and demand at a detailed scale. China's steel sector, a major global producer with high carbon emissions, heavily relies on conventional blast furnace methods. The study establishes a steel unit database and assesses renewable energy supply potentials at a fine scale to optimize H2-DRI deployment for meeting decarbonization targets. Results indicate the uneven spatial distribution of steel units and the dominance of traditional steel production methods, highlighting the need for transitioning to H2-DRI technology. The study evaluates carbon mitigation effects, economic costs, and water consumption of proposed deployment schemes, emphasizing the impact of renewable energy supply on mitigation outcomes. By considering the spatial aspects of renewable energy resources, the article underscores the importance of appropriate deployment scales for effective decarbonization in China's steel sector.