| Electra's Melissa Mansour, Faxson Cockrell, Colleen Wallace, Ben Whitman and Michael Street (left to right) inspect a plate of iron from the company's low-temperature iron electrowinning cell at its Colorado pilot facility. |
Concerns about a shortage of high-grade iron ore bottlenecking steel producers' path to lower emissions have eased, painting a more optimistic picture for lower emissions steel production, an analyst told S&P Global Commodity Insights.
Steel accounts for around 2,800 million metric tons of carbon dioxide emissions per year, equivalent to about 8% of total energy system emissions, according to a 2023 report from the International Energy Agency. Steelmakers are under pressure to slash those emissions to meet demand from customers looking to reduce their own upstream greenhouse gas reduction targets.
However, the leading green steel technology uses hydrogen for fuel and higher-grade iron ore pellets as a raw material. The necessary iron ore was in short supply, and the price jumped in 2022 as steelmakers scrambled.
In a 2022 report, the Institute for Energy Economics and Financial Analysis (IEEFA), a think tank,
"I'm definitely more optimistic than I was two years ago," said Simon Nicholas, lead global steel analyst at IEEFA and author of the 2022 report. "I thought iron ore quality could be a bit of a bottleneck. Now, I think it's not too much of an issue, and it's just a question of how quickly the cost of green hydrogen comes down."
Production revs up
DRI-based steelmaking projects totaling 94.3 million metric tons per year of steelmaking capacity are in the project pipeline through 2030, according to a 2023 report from Agora Industry, a consultant. Vale SA, a major global iron ore miner looking to supply net-zero steelmakers, expects a 70 million-metric-ton annual gap between supply and demand of DR-grade iron ore by 2030, according to a December 2023 presentation to investors.
However, iron producers are stepping up their activity to meet the demand.
Rio Tinto is advancing the Simandou mine in Guinea, West Africa, hoping to tap into the world's largest reserve of high-grade iron ore as soon as 2025. Executives at the company believe some of the iron available at Simandou can meet DR-grade standards, according to a Jan. 7 report in the Financial Times.
Other mines producing high-quality iron can also help steel producers shrink their carbon footprint.
Low grade to high grade
Electrasteel Inc., a Boulder, Colo. startup doing business as Electra, says its technology can refine low-grade ores below 55% iron into a product with a purity suitable for use in electricity-powered arc furnaces, including using waste materials from mining operations.
"The process design actually permits us to take this stranded ore from the miner, and basically, we have the opportunity to extend the life of the mine," Electra Chief Commercial Officer Francois Perras said. "We take some stranded ore out that's already been mined, and the CO2 footprint is already embedded in it."
In 2021, Rio Tinto and BlueScope Steel Ltd. announced plans to explore low-carbon steelmaking pathways to use lower-grade iron ores from Australia's Pilbara region, including a process using an electric melter to refine the mined material. In early 2023, mining giant BHP Group Ltd. announced an agreement to construct an electric smelting furnace pilot facility to facilitate steelmaking using renewable electricity and hydrogen, replacing coking coal with a DRI step.
Earlier in February, Rio Tinto and BHP Group, the two largest iron ore producers in Australia, announced they would work together with BlueScope to investigate the country's first ironmaking electric smelting furnace that would produce near-zero greenhouse gas emissions using lower-grade ores. The pilot facility, the companies announced, could be commissioned as early as 2027.
Vale announced in late 2023 that it signed an agreement with H2 Green Steel to study the development of green industrial hubs in Brazil and North America to pair high-quality iron ore with green hydrogen-based steel production techniques.
Whether it is the cost of hydrogen or improving the quality of the iron ore inputs, all of these new technologies are likely to mean more expensive steel in the future, Chris Barrington from the International Iron Metallics Association cautioned in an interview.
"If you're producing green steel, you'll need to sell it at a premium because your costs will be higher," Barrington said. "I think the message is getting out there that life will be more expensive. But I don't think we really know to what extent."
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