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Steelmakers must focus on decarbonizing blast furnace use: BHP CEO

Highlights

BHP says viable hydrogen DRI decades off

Anglo American would like to stay in met coal until 2035

RT CEO sees decarbonization role for Simandou

FMG to make 15 million mt/year green hydrogen by 2030

Steelmakers will need to focus on decarbonizing blast furnace steelmaking in the short and medium term, because viable widespread hydrogen-based steelmaking may still be 20-30 years off, Mike Henry, CEO of BHP, the world's largest mining company, and also a steelmaker, said Oct. 7.

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One major factor to consider is that many of the world's major blast furnaces, including in China and India, still have 20-30 years' useful life left, Henry said during an interview at the Financial Times Mining Summit, mainly a virtual event.

The industry needs to take into account the "sunk capital" in those blast furnaces, Henry said. "The economics of that will prove to be too challenging .... for a rapid switch to hydrogen," he said, adding that BHP expects hydrogen "to make bigger inroads in two to three decades' time."

"Hydrogen will have its day, but it's going will take some time to get there given current economics... and the massive quantity of capital needed to develop green DRI," Henry said. It could cost "many hundreds of billions of dollars" to decarbonize the world's entire steel industry using green hydrogen-based direct reduced iron, he said.

Green hydrogen is produced using renewable energy to electrolyze water and is currently considered a costly process due to the high costs of renewable energy.

Shorter-term, steelmakers need to move to more efficient blast furnace steelmaking, using higher quality hard coking coal, injecting hydrogen directly into the blast furnace, which is one step short of using hydrogen-based direct reduced iron, and with a focus on using higher quality iron ore, he said.

BHP itself does not see itself becoming a major green hydrogen based DRI producer, Henry said.

Because of the challenges in steel industry decarbonization, collaboration is key between iron and met coal producers and their customers. For that reason, BHP has over the past year set up three major accords with China's Baowu and HBIS steel groups and Japan's JFE, Henry said. These will work on reducing the steelmakers' Scope 1 and 2 emissions and BHP's Scope 3 emissions, Henry said.

BHP itself will invest $2bn-$4bn in meeting its own target to reduce its emissions by 30% by 2030, he said. A target has also been set to reach net zero in scope 3 in shipping at this time.

Anglo sees 'mature' debate on coal

Mark Cutifani, chief executive of miner Anglo American, told the FT event that steel has an "absolutely critical" role in the world's decarbonization as it is used as a raw material for vehicles and in renewable energy installations. He noted that even using coking coal, steel can now be produced in a carbon-neutral manner using carbon credits.

In addition, "we need high quality iron ore to be able to produce steel with 20-30% less emissions," he said.

The Anglo executive said he considered "very positive" the "more mature debate" which has recently emerged on the use of coking coal in steelmaking. Anglo has demerged or sold its thermal coal businesses and is making a responsible exit from coal, he said.

However, Anglo continues to be the world's third largest exporter of metallurgical coal for steelmaking, with customers throughout Asia, Europe and South America.

"We would like to take met coal to 2035 when the natural change to hydrogen occurs.... It will be 2040 before hydrogen starts to make a big difference in steel," Cutifani said.

FMG bets on green hydrogen

Rio Tinto executive director & CEO Jakob Stausholm told the event that he considers steel decarbonization to be "one of the world's biggest challenges" and that development of the massive high-grade Simandou iron ore deposit in Guinea, in which Rio Tinto is a shareholder, could make an important contribution here.

Andrew Forrest, chairman of Fortescue Metals Group, the world's fourth biggest iron ore producer, noted that all steel mills are now facing heavy pressure to decarbonize. "The heavy carbon-emitting steel industry won't exist after 2050," Forrest told the event.

FMG believes that carbon capture and storage is not an efficient way for steelmakers to decarbonize "as it can't even manage 5% of what we need."

FMG is investing heavily in production of green hydrogen and, via Fortescue Future Industries, plans to produce 15 million mt/year of green hydrogen by 2030 and 50 million mt/year after that, having already secured renewable energy sources, including in Africa, Forrest said.

This will help the company in its quest to achieve net-zero Scope 3 emissions by 2040, an "industry-leading target" announced this week, the executive said.