Ukraine-focused iron ore miner Ferrexpo is looking to reduce its carbon footprint by adopting a series of measures, including transitioning away from diesel use in its transport fleet and moving to more renewable forms of energy in its mining operations, interim Chief Executive Jim North told S&P Global Platts in an interview.
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The Switzerland-headquartered company has committed to produce carbon neutral pellets by electrifying its mining fleet, with a boosted share of hydro and nuclear power, as well as a possible contribution from its own solar energy generation and potentially even using hydrogen instead of natural gas to fuel its pelletizers, North said.
Producing carbon neutral pellets is critical to the green steel story, with steelmakers looking for reduced-carbon or carbon-free inputs, North said.
Ferrexpo's Scope 1 and Scope 2 emissions total 113 kg of CO2 per ton of pellets, with the level being about the industry mean. Three key contributors drive its carbon footprint, with power usage being the largest, followed by diesel use in the mining fleet and natural gas used in pelletizers.
A legislative change in Ukraine some 18 months ago permitting industrial power users to buy directly from producers has allowed the company to boost its hydro and nuclear use to 22% of total consumption, helping it to reduce its emissions by 21%.
"We would like to buy all renewables if it was made available to us," said North.
Ferrexpo buys power directly from providers, but only on a month-by-month basis, as Ukrainian legislation does not allow the company to have long-term power purchase agreements.
In addition, the company is installing a 5 MW solar power facility to explore how effective solar generation could be in central Ukraine and make its own assessment before scaling up the project.
The facility, covering 2.5% of the company's needs, will come online in August and run for 12 months. Should it prove efficient, Ferrexpo will consider a larger facility, North said.
With its power demand set to grow in the future amid mining electrification and growing pellet production, Ferrexpo is already considering how it will meet its needs and renewable power sources are a priority.
"We do not want to be an energy producer. Ideally we would like to partner with somebody, who would create renewable capacity and do a longer-term purchase agreement with them," North said.
Diesel and natural gas
Energy accounts for 50% of Ferrexpo's CO2 emissions, with 15% coming from diesel use and 20% natural gas use.
The company is working with mining equipment manufacturers to study what it can do in terms of mining electrification to allow it to reduce diesel consumption by 60%, North said.
It aims to do this over a number of years, gradually replacing retiring diesel trucks.
The options to power electric trucks will either be battery technology, hydrogen cells or ammonium-carrying cells that produce hydrogen on the truck, the CEO added, saying the company has yet to make a decision on this but is leaning toward battery use.
"We envisage such trucks that will be using batteries when they are in the bottom of the mine and on the top of the waste dump while operating on the power line for the rest of the time," said North. "The battery technology for that is about three to five years away from now."
In terms of natural gas replacement, Ferrexpo believes hydrogen is the way forward.
"It is not economic at the moment to move our pelletizers across to hydrogen as cost-wise hydrogen production remains prohibitive and there are some complexities around that swap from a natural gas to a hydrogen burner," said North. "But that is an evolving situation, and the next five to eight years are likely to make that transition from natural gas to hydrogen competitive."
In the meantime, Ferrexpo is looking at establishing a small pilot hydrogen plant to understand how the fuel can be introduced into its processes.
"When people start to factor in the cost of carbon, the penalties and taxes associated with carbon in their production, there would be a lucrative proposition to rapidly install hydrogen," said North.
"The EU is ahead of the game in terms of taxing carbon, but I am not concerned about that tax as I do not approach decarbonization from a risk perspective," he added.
The EU's Carbon Border Adjustment Mechanism will be put in place in 2022, affecting the bloc's exports, especially of metals.
"We believe we can produce a carbon-free pellet, but it is going to take us a considerable amount of time," the CEO said.
Ferrexpo has been reluctant to quantify its intermediate targets on the way to carbon neutrality and has not committed to any particular date in achieving them. The timing depends on many factors, it has said.
The timescale and affordability of moving over to an electrified fleet is a big factor.
Another factor is understanding when the Ukrainian energy market will be liberalized enough to allow longer-term power purchase agreements and welcome renewable energy projects.
The country's receptivity to hydrogen is also something that might speed up or slow down the uptake of the new technology by domestic industries.
"Transportation of all flammable commodities is possible and hydrogen is no different," North said. "You can pipe it like you pipe natural gas, but setting up local production and distribution would make a big difference."