DRI hubs to emerge near iron ore mines, green hydrogen sources: FT Summit

Green hydrogen-based direct reduced iron production hubs may start emerging near iron ore mines as the steel industry advances in its decarbonization drive, speakers at the Financial Times' Hydrogen Summit in London said June 16.

DRI plants don't need to be next to steelmakers, as usually occurs at present, they said.

Andrew Forrest, chairman and founder of Australia's Fortescue Future Industries & Fortescue Metals Group—the world's fourth-biggest iron ore producer—said that the Pilbara, where FMG produces high-grade iron ore, could in the future become a hub for green hydrogen-based production of DRI, or sponge iron, a partly processed steelmaking raw material.

FFI, which is building a global portfolio of renewable green hydrogen and green ammonia projects, is already building renewable energy installations and electrolyzers in Western Australia. The company aims to produce 15 million mt/year of green hydrogen globally by 2030—with some supplied to steelmaking nations Germany and the UK—with output rising to 50 million mt/year in the following decade.

By comparison, other speakers at the summit considered the European Union's plan to have 20 million mt/year of green hydrogen available by 2030—including 10 million mt from EU production and 10 million mt imports—ambitious, but potentially achievable.

Current global consumption of grey hydrogen was put at between 80 million and 100 million mt/year, with the aim to eventually replace this with green hydrogen.

"However, we may need all colors (of hydrogen, including blue) to meet (net-zero) targets by 2050," said Guloren Turan, a manager at the Global CCS Institute.

"If green hydrogen doesn't account for 20% of total energy supply by 2050, we will be in trouble," said Demetrios Papathanasiou, global director, energy and extractives global practice, at the World Bank, who expects "economics" to drive the transition.

Regionalization is key

Steelmaking, accounting for up to 11% of all global CO2 emissions, was singled out as one of the sectors to benefit most from the greater availability of green hydrogen.

"There's a really serious incentive for the steel industry to use hydrogen to avoid the carbon," Forrest said.

Adair Turner, chairman of the Energy Transitions Commission, a multi-stakeholder group, told the summit the geopolitical shape of the steelmaking sector may in the future change with decarbonization.

"There's no reason why DRI production needs to be next to steel-production processes," Turner said. "DRI plants could be near iron ore mines in countries where renewable energy and hydrogen could be produced more cheaply... for instance, in parts of Australia."

It makes sense, meanwhile, for steelmakers to be sited near their end-users, for instance in the automotive sector, he noted.

Because of the "huge challenges" in transporting green hydrogen, highlighted by various speakers at the event, Turner sees that "overall, the future energy system will be less distributed than at present, and the intensity of international trade should be less."

Martin Lambert, head of hydrogen research, Oxford Institute for Energy Studies, and Turner both said that while some hydrogen-carrying pipelines are likely to emerge, for instance across the Mediterranean, pipelines would be far more suitable for transporting green hydrogen derivatives, such as green methane and ammonia.

"I can see pipeline links, but can't see green hydrogen being a globally traded commodity: this should be kept as local as possible due to transport difficulties," Lambert said.

Papathanasiou foresees that 12 nations, including India, which is currently a major coal-based DRI producer, will have significant production and export opportunities for green hydrogen in the future.

"India is moving forward with its hydrogen strategies," he said.

Lower coal usage

DRI and HBI, its hot-briquetted form, are made from high-grade iron ore pellets typically reduced by gas to provide a highly metalized raw material for steelmakers' furnaces. The higher the metallization, the less coal or coke is needed in the blast furnace. If the reducing gas used is hydrogen made from renewable energy sources, the resulting steel production can be low carbon, or potentially net-zero carbon, if offsets are also used.

Platts assessed the IODEX 62% Fe Iron Ore Index at $129.50/dmt CFR North China June 16, down $1.35 on weakening Chinese steel demand, according to S&P Global Commodity Insights.

Mining industry

While steelmaking will continue "hard-to-abate" for some time, FMG's Forrest said he believed the mining industry now has good chances of becoming green because it has to look at everything through three optics: human rights, the environment, and commerce, including finding Scope 3 solutions with its customers. FMG, along with other major miners including Rio Tinto, BHP, Vale, and Anglo American, are introducing or looking at introducing hydrogen-powered mine trucks, investing in renewable energy, and minimizing or eliminating fresh water usage at mine sites.

"From the pariah of the investment world we'll be the leading lady," Forrest said.

Turan said carbon capture and storage projects will need to be used in steel industry decarbonization, as well as in other "hard-to-abate" sectors including cement and aviation if 2050 climate targets are to be met. CCS is currently removing 40 million mt/year of CO2 from the atmosphere at 29 installations worldwide, equivalent to the emissions from 8 million cars, she said.

It was noted the UK has put aside a GBP1 billion ($1.24 billion) budget for CCS project funding.