Miners grapple with green steel as they rush to decarbonise

Australia’s biggest miners are ramping up efforts to identify and develop low carbon methods of turning iron ore into steel as they grapple with the huge investment required to slash carbon emissions from steel making.

BHP, Australia’s largest mining company, will design and build an electric smelting furnace pilot plant in Australia with help from engineering firm Hatch. The furnace will be capable of producing steel from iron ore using renewable electricity and hydrogen, replacing coking coal, a key source of carbon emissions.

Australia’s top mining companies are facing growing calls to tackle emissions.Credit:Bloomberg

Conventional steel making is heavily reliant on coking coal and energy-hungry blast furnaces. Steelmakers and miners view hydrogen made from renewable electricity as a key pathway to eliminating carbon emissions, although the technology is still not at commercial scale and is hampered by high costs.

BHP’s pilot plant aims to reduce emissions by up to 80 per cent using renewable electricity and green hydrogen in an electric smelter that can process the lower grade iron ore mined in Western Australia’s Pilbara region.

Chief commercial officer Vandita Pant said the plant would give BHP insights into how the technology for converting iron ore worked and de-risk future investments in commercial scale smelters. Other countries, most notably Sweden’s HYRBIT project, have developed similar technologies.

Steelmakers have for thousands of years used coal to remove oxygen from iron ore, emitting huge quantities of CO2 in the process. When hydrogen is used instead of coal, it emits water instead of CO2. Mining ore and making steel generates nearly 10 per cent of the globe’s emissions, with about two-thirds of those emissions released during the conversion of the iron ore to iron.

Another miner, Andrew Forrest’s Fortescue Future Industries, is also making headway on alternative production of green iron. FFI said it has built a pilot plant that can turn iron ore into green iron without hydrogen or coal.

FFI’s said its research and development team successfully processed 150 kilograms of iron ore to make metallic iron at its Innovation Centre in Perth. The iron ore was converted using electrolysis, where an electric current is used directly to remove oxygen from the iron oxide ore at a low temperature.

Chief executive Mark Hutchinson said FFI’s technology was a “breakthrough”, showing significant progress. “We know the world is going to want iron ore and steel for a long time, but the level of emissions coming from that process is unsustainable,” he said.

‘I can see that steel will become the material of the future. I would argue that there is a more credible path forward for steel decarbonisation than cement for example.’

BHP and Fortescue’s projects may not get beyond the pilot phase, but if they do the prize is huge. Iron ore is Australia’s most lucrative commodity and one of the country’s single biggest exports, accounting for 35 per cent of the world’s trade.

“If we could capture between five and 10 per cent of the world’s steel business. That’s huge in terms of high-paying manufacturing jobs. The potential here is not just the economic benefit … but the jobs as well,” Grattan Institute director Tony Wood said.

Establishing a local industry to produce 50 megatonnes of green steel a year in Australia by 2050 will cost $30 billion in technology investments, according to a report released last month by the Australian Industry Energy Transitions Initiative, a body backed by Climateworks Centre and Climate-KIC Australia.

Creating that much steel using green hydrogen will need nearly double the country’s current total electricity output, the Pathways to Industrial Decarbonisation report said.

Rio Tinto boss Jakob Stausholm said it would take decades to successfully establish green iron and steel. “The economics of it is very challenging,” he said.

“It’s going to take decades but as soon as you really feel you can see the pathway forward then it’s just a matter of getting it done. I can see that steel will become the material of the future. I would argue that there is a more credible path forward for steel decarbonisation than cement, for example.”

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