Global Mining Research has a nice primer on the emergence of green steel.
Green Steel – Why is it relevant?
The production of steel is one of the most polluting industries from a CO2 perspective, representing in the order of 8% of global emissions. For the miners ESG reporting has never been as relevant and for an iron ore or coal company this is critical as investors examine Scope 3 emissions (the result of activities commodity-purchasing organisations undertake).
The concept of Green Steel is to replace the use of coke (and thereby coking coal) as a reducing agent and fuel in the steel making process, which is at its heart 2Fe2O3 + 3C = 4Fe + 3CO2. There are a few potential technologies here, these include Polymer Injection, Hydrogen Breakthrough Ironmaking Technology (HYBRIT) and the concept of Molten Oxide Electrolysis (MOE). (Similarly, the aluminium industry is trying to replace the carbon anode in the electrolytic process).
In terms of drivers for pushing these changes, in addition to those of the miners and their shareholders, there is the political angle to consider. This includes the recent Biden win in the US, increasing the western environmental agenda, countries setting emission targets, COVID recovery initiatives, and trade wars, all of which make green technologies very topical now.
From a company perspective, FMG has been talking most about the application, but it is all very much in the embryonic stage despite the publicity. However, FMG plans, by the end of this year, to commence construction of a pilot plant (undisclosed technology / process) which is more of a commitment than other miners. Other corporates have been less vocal but still active, for example Boston Metals recently raised US$50M for its MOE process with both BHP and Vale investors.
How far away are these technologies?
Many of these projects are still in preliminary stages of research and development. One such example is Polymer Injection Technology developed by Professor Sahajwalla and her team at the Uni of NSW. As an alternate to coking coal, recycled tyres and plastics are added to a blast furnace at high temperatures to provide the carbon needed to make steel. Another, Swedish technology under development by JV partners SSAB, LKAB and Vattenfall is called HYBRIT and aims to use hydrogen gas as the main reductant, to produce sponge iron and water as a by-product. A third technology called MOE uses renewable energy-driven electrolysis of iron ores to produce iron and oxygen (Fe2O3 + e– = 2Fe + 3/2O2). Most of these technologies are in a pilot testing stage, and it could well be over a decade until there is a commercial outcome.
What are risks and implications?
There are the usual risks involved with adopting any new technologies, which include: funding, the ability to commercialise the new technologies, and potential delays/overruns. In Australia, we don’t have a great track record with new technologies and for those with long memories there was BHP’s Hot Briquetted Iron (HBI), RIO’s HiSmelt and Australian Magnesium Corp, for example. In the case of the HBI plant in Port Hedland in the 1990s the plant was expected to cost A$1.5B, however this blew out to A$2.5B. The plant consistently underperformed and produced a maximum of 1.7Mt in its final year of life in 2004 and was scuttled due to operational and safety issues. The other major implication for Green Steel will of course be metallurgical or coking coal consumption, which in the long term would hit the coal miners the most, along with BHP, GLEN and TECK of the big caps.
Australia is a very modest steel producer, but the key exporter of iron ore and coal products globally. Numerous vested interests will play a part, including protecting the tens of thousands of workers employed in the iron ore / coal industry which sometimes clashes with evolving climate policies (with the private sector taking the lead) and with potential for a 2021 Federal election. All this makes for an interesting mix. Nevertheless, Green Steel is a fascinating topic, and one no doubt we will come back to discuss further.