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Mitsubishi Heavy investment to aid hydrogen growth in South Australia steel hub

SNL Image
Artist's rendering of Handymax and Capesize vessels docked at the proposed port at Cape Hardy for loading in South Australia.
Source: Iron Road Ltd.

Mitsubishi Heavy Industries Ltd.'s investment in South Australia's hydrogen sector has led to plans for an iron ore "green pellet" plant at Iron Road Ltd.'s Cape Hardy port site. It could also pave the way for hydrogen technology to aid Japan's and South Korea's steel industry decarbonization ambitions.

Iron Road told the ASX on Jan. 12 that it recently extended its 2019 heads of agreement and project development accord with Australian renewable energy integrator The Hydrogen Utility, or H2U, by a year.

H2U has identified that a minimum 200-hectare footprint on the Cape Hardy site is needed for a proposed green manufacturing precinct.

H2U attracted Mitsubishi Heavy in November 2020 as a partner for its own A$240 million Eyre Peninsula Gateway project at Port Bonython, which involves a 75-megawatt electrolysis plant and a 120-tonne-per-day ammonia production facility, with a total production capacity of 40,000 tonnes per year of green ammonia.

Mitsubishi Heavy will support Gateway's front end engineering and design study and provide key plant equipment, including hydrogen gas turbines and hydrogen compressors, with an eye to start green hydrogen and ammonia production towards the end of 2022.

"Green hydrogen produced by water electrolysis using power derived from renewable energy sources such as wind and solar, will be used in the manufacture of green ammonia, and to demonstrate hydrogen-powered gas turbine generators," Mitsubishi Heavy said of the Gateway process in a Nov. 26, 2020, statement.

Gateway will initially supply the South Australian and domestic markets, and support trial export shipments of green hydrogen and ammonia to Japan and other north Asian economies, before expanding to an industrial-scale facility with a capacity of 2,400 t/d of green ammonia to drive further exports.

Iron Road also reported on Jan. 12 that master planning a green manufacturing precinct at the Cape Hardy port site will now proceed, followed by the negotiation of commercial arrangements with H2U in the second half.

H2U is considering a green pellet plant fueled by renewable energy at the green manufacturing precinct. The plant would use high-grade iron concentrate from Iron Road's Central Eyre magnetite iron project.

H2U's commercial and strategy executive director, Tristram Travers, told S&P Global Market Intelligence that the options being considered at Cape Hardy for further downstream use of green hydrogen and ammonia was a "further expansion" of the Gateway project in his company's overall strategy.

Travers said one of Mitsubishi Heavy's subsidiaries is "one of the world leaders of the green pellet/green steel process," and that the Japanese multinational's involvement opened up the chance to investigate further opportunities like the green pellet plant.

Industrial synergies

Mitsubishi Heavy and H2U will look into synergies with nearby industrial operations, including shared infrastructure, to further reduce carbon emissions in the region.

Gateway is near the Whyalla steelworks site, which owner GFG Alliance Ltd. wants to transform into its own "green steel" facility.

Travers said the town is home to a "multi-generational" steel workforce, and given "one of the things [Mitsubishi Heavy] does well is integrate their subsidiaries and their investees," the potential exists to interweave a new hydrogen hub into the steelmaking region.

A green pellet plant in South Australia would ensure "you're not just shipping 70% iron as iron ore, you're shipping 100% iron ... and decarbonizing the whole steel supply chain," Travers said.

Iron Road's stock soared over 143% in October 2020 when Macquarie Capital agreed to become a joint developer of a A$250 million stage-one grain and multicommodity, multiuser export facility at Cape Hardy.

That port is slated to later expand to accommodate Central Eyre's planned 12 Mt/y of concentrate production, only a fraction of which would be pelletized in the green pellet plant.

The South Australian government's October 2020 hydrogen export prospectus recognized Cape Hardy's potential to connect renewable resources about 60 kilometers away, and the potential for small-scale and large-scale green hydrogen export ranging from 60,000 t/y to 250,000 t/y.

As Iron Road continues to seek a strategic finance partner ideally linked to off-take for its US$1.74 billion Central Eyre project, CEO Larry Ingle said in an interview that the green pellet plant opens the project up to a new green pellet market that is increasingly essential for Japan's and South Korea's decarbonization plans.

Accordingly, Mitsubishi Heavy's aim on its South Australian investment as stated in its Nov. 25 announcement is to create and market "new business models" leveraging its experience and technologies across the entire hydrogen supply chain, including hydrogen production and hydrogen-fueled power generation.

To this end, in November 2020, Mitsubishi Heavy invested in U.S. group Monolith Materials Inc., which developed a process technology that converts natural gas into clean hydrogen and a solid carbon material called carbon black, a critical raw material in the automotive and industrial sectors.

Mitsubishi Heavy was also due to start trial operation of the world's largest net-zero carbon dioxide emission steel plant in Austria in 2021, with capacity for 250,000 t/y of steel product using hydrogen instead of coal for the direct reduced iron process.