BHP, Linde see high steel decarbonization costs for hydrogen DRI

BHP Group expects higher energy costs to limit initial expansion in new green hydrogen steelmaking, with alternative routes to decarbonization and fossil-fuel reduction using gases driving emissions cuts, a company executive said July 15.

Hydrogen-based direct-reduced iron may be a key "long-term pathway" for the steel industry, and could make a meaningful contribution to steelmaking emissions cuts in the 2050s, Ivan Bondarenko, BHP's head of marketing strategy for coal, said in a presentation.

In the meantime, optimizing the existing blast furnace and ferrous scrap routes to cut emissions remains likely: green DRI will consume vast renewables capacity to replace pig iron production, which is not yet assured, according to steel, coal and coke and gas industry executives.

"The real challenge with this technology are the broad system infrastructure requirements needed to deliver vast quantities of green hydrogen," Bondarenko told the webcast S&P Global Platts Singapore Coking Coal Conference.

Blast furnace injection with different reformed gases, replacing oil and natural gas with hydrogen for heating and other steel processes, and improving steel raw materials preparation may substantially cut emissions.

Using coke oven gas into the blast furnace to slash emission is being pursued at European mills owned by ArcelorMittal, ThyssenKrupp and Dillinger SHS Group. Estimates in Europe suggest its possible to replace 20% of met coke with hydrogen injection, said Raghav Agarwalla, director of cokemaker Saurastra Fuels at the Platts conference.

Gas supplier Linde highlights potential for emissions cuts at a lower price than green hydrogen DRI, and hydrogen injection in the blast furnace, based on market prices. An integrated steel plant could cut emissions by a third without using hydrogen, said Joachim von Scheele, global director of commercialization at Linde.

By charging DRI or hot-briquetted iron, maximizing injection with gas, minimizing slag volume, as well as boosting scrap in the basic oxygen furnace, substantial emissions cuts are possible from existing furnaces and steel works, he said. Using hot stoves and converting reheating furnaces to flameless oxyfuel, as well as gasification and blast furnace top gas recycling can provide "more bang per buck," Von Scheele said.

"We should not forget what can be implemented today by increasing the energy efficiency in the steelmaking processes throughout the value chain... to reduce fossil fuel in many of the processes, for example reheating furnaces and hot stoves, " Von Scheele said at the Platts conference. "We can reduce the carbon footprint by 200 million mt/year in the steel industry just by implementing that type of technology."

Linde expects a "massive increase" in the gasification of biomass and waste to be used in blast furnaces and direct reduction shafts.

First mover green DRI projects such as SSAB, LKAB and Vattenfall's HYBRIT in Sweden may benefit from iron ore and renewable power supplies from shareholders. ArcelorMittal, Voestalpine and Salzgitter have hydrogen DRI and steel projects under development, including converting a DRI plant running on gas in Hamburg to hydrogen, and new cutting-edge plants in Germany, Spain and Austria.

"Green steel projects can materialize in the near term in pockets, when and where you can get large GW-scale, low cost green power," said Pravin Mathur, Linde's executive director for metals, combustion, energy. "But wide acceptance and broad conversion will require much longer time periods."

UBS said July 14 it estimates cost differentials between hydrogen DRI and steel from blast furnaces will not justify conversion in Germany and Austria, without a large increase in carbon emissions prices.

BHP, Asia steel

BHP is the world's biggest seaborne coking coal miner, and has started tie-ups with major steel companies in Japan and China such as JFE Steel Corp. to reduce steelmaking emissions by optimizing existing and new processes.

"Our analysis suggests that for green hydrogen to be competitive vs brownfield steelmaking, the cost needs to come down to about $1/kg of hydrogen," Bondarenko said.

To reach this level, electrolyzer capex costs need to come down by a multiple, renewable power costs need to be close to $10/MWh and carbon costs needs to be over $100/mt, he said.

Platts assessed renewable hydrogen in the Netherlands, based on PEM electrolysis including capex, at Eur6.17/kg ($7.28/kg) on July 15, while natural gas-based production with carbon capture and storage and capex was Eur2.65/kg.

Platts estimates show renewable hydrogen DRI costs in Europe have increased progressively over pig iron costs since early 2020, on higher hydrogen, gas and renewable power costs, and current electrolyzer efficiencies, along with higher iron ore contract pellet premiums for the third quarter. Blue hydrogen, using gas and carbon capture and storage, is more competitive, along with natural gas DRI. The ability to sequester carbon depends on location and policies, with the EC supporting green hydrogen import projects to build up future trade supply.

"With so many headwinds to consider it seems unlikely that green hydrogen will achieve competitive narrow or all-in costs anytime soon, particularly not in the 2020s, or in the first half of the 2030s," Bondarenko said.

DRI investment costs

According to Platts estimates, renewable hydrogen-based DRI costs averaged at Eur691/mt, based on iron ore cash costs and mix of energy prices in the Netherlands, compared with Eur389/mt for pig iron's met coal and iron ore costs basis CFR Rotterdam.

High capital costs for DRI and EAF plants with upstream green hydrogen generation and supply investment could reach $4,000/mt of steel capacity, Linde's Von Scheele said.

This will require large investments, steel, energy and carbon policy support and stakeholders willing to endure a long payback. The EC's new "Fit for 55" climate package included a target of a 50% renewables share for hydrogen used in industry. Cuts now may set up a solid contribution against Paris Agreement goals, well ahead of any future blossoming in green hydrogen and steel transition.

"We will see a gradual transition to low carbon intensity steel production," Von Scheele said. "To a certain extent carbon will continue to be used, however, the current sources will step-by-step largely be replaced during the decarbonization journey towards low-carbon steel making. By around 2045, we might have a carbon footprint that is maybe 15%-20% of what it is today."