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Direct-reduced iron becomes steel decarbonization winner

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Direct-reduced iron becomes steel decarbonization winner

  • Featuring
  • Diana Kinch
  • Commodity
  • Energy Transition Metals
  • Topic
  • Energy Transition Hydrogen: Beyond the Hype

Direct-reduced iron and its more transportable sister hot-briquetted iron have dallied in the wings of mainstream steelmaking as high-quality and low-residual furnace inputs for nearly 60 years. Suddenly the two have swept center stage for holding the key to steel decarbonization.

Combined with hydrogen instead of traditional natural gas and linked with efficient furnaces powered by renewable energy, they have the potential to provide the most effective route to making "green" steel, be it low-carbon or zero-carbon. That's important in a hard-to-abate sector that accounts for up to 11% of all global CO2 emissions.

Blast furnace steel production – accounting for two-thirds of global crude steel output of a massive 1.95 billion mt in 2021 – typically produces 2.0 mt/CO2 per mt of crude steel. DRI with hydrogen brings this below 0.5 mt/CO2 per mt, Singapore Exchange said at the SGX Iron Ore Forum in May.

In the European Union, the race is on to make green steel commercially viable. The EU's overall greenhouse gas emissions reduction target for 2030 requires sectors covered by the Emissions Trading System, including steel, to reduce their emissions by 43% compared to 2005 levels. Free ETS allowances for steelmakers are to be phased out between 2026 and 2030, leaving mills with rising costs as they simultaneously adapt to new technologies, with consumers set to face green steel price premiums.

Steelmaking using DRI and HBI promises to be a winner in this race. As a production route, it's already established. Hydrogen-based DRI was produced at a commercial scale in Trinidad and Tobago using a fluidized bed reactor process as long ago as the early 2000s. Now the process needs to be fine-tuned and accompanied by a truly fossil-free energy source.

"Direct-reduced iron is considered the primary actor in the transition to a sustainable steelmaking route," said Pasquale Cavaliere, professor of metallurgy at Italy's University of Salento. "And in order to produce carbon-free steel, hydrogen is fundamental."

World DRI production by process

Note: Global DRI production, including hot and cold DRI and HBI, has shown an upward trend since 790,000 mt was recorded in 1970. In 2020, well over half of global DRI output came from India (where production is largely coal-based in rotary kilns) and from Iran, which in addition to using Midrex technology, has its own natural gas-based technology, Pered. In 2020, global output fell from 2019 due to COVID-19. According to data from worldsteel, production totaled 102.77 million mt in 2021.

High metallization cuts coal usage

DRI and HBI are usually made from high-grade iron ore pellets typically reduced by gas to provide a highly-metallized raw material for both electric arc furnaces and traditional blast furnaces.

According to US-based DRI technologist Midrex Technologies, HBI, which is metallized beyond 90%, needs only to be melted. Therefore, HBI use in blast furnaces decreases the consumption of reducing agents.

A 10% increase in the metallization of blast furnace burden results in a 7% decrease in the coke rate, which in turn reduces CO2 emissions. If 100 kg of HBI/per mt of hot metal is used, the reducing agent rate (coke equivalent) can be decreased by around 25kg/mt of hot metal.

Technology pathways

Broadly, there are three routes to decarbonize steelmaking, according to the European Steel Technology Platform (ESTEP), which groups together the European Commission, national governments and major steelmakers in a bid to maintain EU leadership in the low-carbon steel production drive:

  • Circular economy – based on scrap usage in both basic oxygen furnaces and EAFs
  • Smart carbon usage – involving use of conventional blast furnace or BOF plants with add-on CO2 mitigation technologies such as Carbon Capture & Utilization or Carbon Capture & Storage
  • Carbon direct avoidance – by using DRI or HBI

None are simple or cheap. Scrap availability is growing only slowly worldwide, and its prices are increasing. Widespread supplies are dependent on China scrapping its first-generation consumer goods products, a wave now poised to break. And CDA needs ample supply of hydrogen and renewable energy at economical prices.

Smart carbon is therefore the stopgap, but inevitably a short-term solution as it does involve carbon production. Still, this route could prevail for the next 20 to 30 years as that is the remaining useful lifespan of many existing blast furnaces.

BHP CEO Mike Henry told a Financial Times mining summit late last year that the industry needs to take into account the "sunk capital" in those furnaces.

"The economics of that will prove to be too challenging… for a rapid switch to hydrogen," he said.

It could cost "many hundreds of billions of dollars" to decarbonize the world's entire steel industry using green hydrogen-based DRI, according to the BHP chief.

Green hydrogen, produced using renewable energy to electrolyze water, is at present expensive to make due to the high costs of renewable energy.

The EC's Green Steel for Europe initiative is currently spending Eur3 billion on research and development alone. European Steel Association, or Eurofer, said Eur31 billion investments are needed for 60 low-carbon projects in the pipeline.

Looking forward, CDA should be the ultimate goal for steelmakers. In addition to via DRI/HBI processes, assuming a fossil fuel-free energy source, this may be offered by other processes under development:

  • iron bath reactor smelting reduction
  • hydrogen plasma smelting reduction enabling direct transformation of iron ore into liquid steel
  • electricity-based steelmaking by iron ore electrolysis
  • pure scrap usage

World DRI production by region (million mt)

Region 2018 2019 2020
Middle East/North Africa 47.19 50.15 50.04
Asia/Oceania 29.09 34.33 33.71
CIS/Eastern Europe 7.9 8.03 7.93
Latin America (incl. Mexico and Caribbean) 10.12 9.77 7.49
North America (US and Canada) 5.02 4.68 4.52
Western Europe 0.56 0.47 0.53
Sub-Saharan Africa 0.83 0.66 0.18
Source: Midrex Technologies, Inc.

Scaling up

A 1 million mt/year capacity used to be the maximum for DRI and HBI plants, but bigger installations are now emerging worldwide.

Midrex installed a 2 million mt/year HBI plant at Austrian steelmaker Voestalpine's Texas site in 2016, with steelmaker ArcelorMittal acquiring 80% of the project this year as part of a DRI global expansion strategy. Midrex's DRI installation at Turkish steelmaker's Tosyali Algerie produced more than 2.28 million mt last year, with a second 2.5 million mt/year plant ordered, to make increasing use of hydrogen.

In March Tenova HYL, an Italo-Mexican DRI technologist, announced it will supply China's largest hydrogen-based DRI facility so far, with a production capacity of 1 million mt/year of DRI, at Baosteel Zhanjiang Iron & Steel Co., Ltd using the ENERGIRON process developed by Tenova together with Italian plantmaker Danieli. This follows a 2020 order from HBIS Group for China's first hydrogen-based DRI plant, of 600,000 mt/year capacity.

BF and EAF installations worldwide are set to increasingly use DRI/HBI processes. Other steelmakers opting for or expanding the capacity of DRI/HBI installations as part of their decarbonization drive include Nucor Corporation, Salzgitter, and SSAB together with iron ore miner LKAB and energy producer Vattenfall in the HYBRIT project. SSAB claims that HYBRIT, using Tenova HYL DRI technology at a pilot plant in Sweden, is the first-ever producer of fossil-free steel, already being supplied on a trial basis to carmaker Volvo.

Jefferies Research analyst Alan Spence reported May 19 that Northern Sweden has surplus fossil-free electricity, but transmission is a current bottleneck and thus a hurdle to long-term plans for a complete decarbonization of SSAB's European footprint.

All down to energy source

Indeed, while direct emissions in the H2-DRI-EAF route may be reduced almost to zero, the final carbon footprint of this approach relies on the carbon intensity of electricity used – both for hydrogen production as well as to operate the electric arc furnace, said industry group Hydrogen Europe in a May 11 report. For the process to be beneficial in terms of net GHG emissions, the maximum carbon intensity of electricity used cannot exceed 513 gCO2 per kWh, it said.

"According to our estimates, in order for the project to achieve breakeven, the hydrogen delivery price would have to be below Eur3.0/kg - in the 'high prices' scenario and below 1.5 EUR/kg – in the 'adjusted prices' scenario," Hydrogen Europe wrote. "The estimated CO2 breakeven price is Eur140/mt for both price scenarios."

And that looks still to be some way off, in both cases. S&P Global Commodity Insights assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur10.99/kg ($11.48/kg) June 14, up from Eur4.18/kg a year ago, on soaring gas and power prices. Carbon was auctioned at Eur82.31/mt June 15. In short, still too high and too low, respectively, for cost-effective green steel.