A hydrogen production plant in South Australia's mid-north has the potential to help decarbonise a local smelting operation as well as create jobs and earn export income, the state government says.

Trade Minister Nick Champion has met commodity trading company Trafigura, which owns the Nyrstar smelting operations at Port Pirie.

Trafigura is working with the government to progress a commercial-scale hydrogen manufacturing facility in the town to produce 100 tonnes each day from a 440-megawatt electrolyser.

The oxygen created in the production of hydrogen would be used by the Nyrstar smelter, with renewable electricity to be used to run the electrolyser.

"South Australia is already a leader in renewable energy and is well on its way towards becoming a global leader in green hydrogen," Mr Champion said.

"These are the projects that will create jobs for South Australians across a range of specialities for both the short and long-term."

The state government has provided a $2.5 million grant for early engineering designs and is working with Nyrstar around opportunities for the further development of critical minerals.

At the same time, it is also developing its own hydrogen production plant on Spencer Gulf near Whyalla.