The availability of high-grade iron ore is a potential barrier to the uptake of hydrogen in steelmaking, according to a new study from the Institute for Energy Economics and Financial Analysis (Ieefa).

There are two main production processes for making steel from iron ore. The most widespread is the integrated blast furnace and basic oxygen furnace process (BF-BOF), in which iron oxide is reduced to iron inside the blast furnace with coke (derived from coking coal) as a reducing agent. The product of this process is then turned into steel in an oxygen furnace. This method was responsible for 73pc of global steel production in 2020.

A second method is to directly reduce iron without melting and then further process it in an electric arc furnace (EAF). It is this second production method—known as DRI-EAF—that can be decarbonised using green hydrogen.

“To avoid locking in further coal-based steelmaking capacity for decades, some technology switching to DRI-EAF processes will be required before 2030” Ieefa

Steel manufacturers are increasingly announcing pilot and larger-scale green hydrogen DRI projects, stating the technology will be an important factor in achieving 2050 net-zero emissions goals.

But the DRI-EAF method requires a higher grade of iron ore than BF-BOF. This DR-grade iron ore has an iron content of 67pc or more and is less available in the global market. Only 3pc of seaborne iron ore trade has an iron content of greater than 66pc, according to the Ieefa report, titled Iron Ore Quality a Potential Headwind to Green Steelmaking.

“Such a shortfall could handicap a faster switch to DRI technology this decade as well as delaying longer-term targets to significantly ramp up DRI operations to reach net-zero emission targets by 2050,” says the report.

Acting early

Many net-zero emissions pathways for the steel sector foresee the bulk of the decarbonisation process happening after 2030. But around 71pc of existing global BF-BOF capacity will reach the end of its operational life before 2030.

“To avoid locking in further coal-based steelmaking capacity for decades, some technology switching to DRI-EAF processes will be required before 2030 to achieve net zero by 2050,” says the report.

Research organisation Agora Industry has tracked a significant level of DRI-EAF capacity likely to be constructed before 2030, which will require an additional 80mn t/yr of DR-grade iron ore if it all proceeds.

Some, but not all, of the demand from this additional capacity can be met by new mining operations. In its 2021 Iron Ore Project Review, consultancy Wood Mackenzie lists 41mn t/yr of capacity as “probable” to come online before 2030.

There is additional DR-grade ore supply available beyond this should higher demand translate into strong investment signals, but the Ieefa report notes that “the very long lead times for new iron ore projects limit the ability of miners to quickly change their product quality mix.”

Long-term view

Between 2030 and 2050, a tenfold rise in DR-grade supply will be needed to ensure the steel sector is compliant with a net-zero emission pathway—unless technology innovations allow DRI processes to use lower-grade ore. Such innovations would require melting the reduced iron before it is charged into a basic oxygen furnace.

Steelmaker ThyssenKrupp is planning to begin replacing blast furnaces with DRI plants with integrated melting units from 2025. And steelmaker Arcelormittal is also investigating the integration of DRI with a submerged arc furnace melting step, which could allow the use of lower-grade iron ore.

But the report says a rise in demand for green steel—and a willingness to pay a premium for it—will be required to support the levels of investment in these technologies needed for commercial deployment.

---

Author: Tom Young