With global steelmakers increasingly turning to scrap steel recycling and direct reduced iron (DRI) as alternatives to blast furnaces, steel producers will not need to rely on carbon capture if the green steel transition continues to accelerate, says Institute for Energy Economics and Financial Analysis (IEEFA) global steel financial analyst Simon Nicholas.

With Australian iron-ore producers Rio Tinto, BHP and steelmaker BlueScope Steel having announced plans to collaborate on making Pilbara iron-ore suitable for DRI processes that do not use coal, Nicholas argues that carbon capture, utilisation and storage (CCUS) will not play a meaningful role in steel decarbonisation in future.

“BHP and Rio now also have even less reason not to set measurable Scope 3 emissions targets,” he adds.

As reported in Mining Weekly last week, Rio Tinto, BHP and BlueScope announced a new framework agreement for a pilot facility to demonstrate that the production of molten iron from Pilbara ores was feasible using renewable power, combined with DRI process technology.

The DRI-electric arc furnace (EAF) steelmaking pathway using gas is a mature and established technology in places such as the Middle East that do not have coal reserves, says Nicholas.

He notes that DRI technology providers have shown that their equipment is compatible with a switch from gas to green hydrogen, thereby providing a route to near-zero emissions steelmaking.

However, DRI-EAF requires a higher grade of iron-ore than most of the ore produced in the Pilbara.

“A shift away from coal-consuming blast furnaces to DRI is, therefore, a major long-term challenge to Australia’s biggest export,” he says.

Three of the four big iron-ore miners are, consequently, planning to increase the production of higher, direct reduction- (DR-) grade ore.

Brazilian iron-ore miner Vale – already the world’s largest producer of DR-grade ore – is planning to increase production in an attempt to fill the 70-million-tonne-a-year DR-grade ore supply gap it sees emerging by 2030 as DRI-based steel production grows.

Further, Rio Tinto and green energy, metals and technology company Fortescue are also planning major projects in Africa to increase their production of high-grade iron-ore.

BHP, however, is not targeting high-grade ore and is instead leaning more heavily on unproven carbon capture solutions that would allow the continued use of its metallurgical coal, says Nicholas.

“An alternative to increased DR-grade ore supplies is to find ways to allow use of lower-grade ore in DRI-based steelmaking. A promising way of achieving this is via an electric smelting furnace (ESF) – combining a DRI shaft furnace with a melting step to allow the removal of impurities. Both Rio Tinto and BHP have been separately investigating this type of pathway and they will now share what they have learnt so far.”

Nicholas explains that German steelmaker thyssenkrupp is already in the process of replacing the first of four blast furnaces with a DRI-melter combination that will allow them to continue using blast furnace grade ore.

Meanwhile, Fortescue is exploring a pathway towards its 2040 net zero Scope 3 emissions target.

“In contrast, BHP and Rio don’t have a measurable Scope 3 emissions target. With global pressure growing on Scope 3 emissions, this new collaboration limits the companies’ excuses on this even further.”

At the announcement of its collaboration with BHP and Rio Tinto, BlueScope Australian steel products CEO Tania Archibald said: “We believe DRI is the most prospective technology to decarbonise our Australian business…”

Nicholas highlights that the new collaboration on DRI could be eligible for government support through the National Reconstruction Fund or the Australian Renewable Energy Agency, adding that this would be a better way to ‘future proof’ Australia’s biggest export and its steel industry than helping lock in coal-based steelmaking for up to two decades.

To date, virtually all steel companies that plan to build low-carbon steelmaking capacity at commercial scale have opted for hydrogen-based or hydrogen-ready DRI plants, rather than CCUS.

The 2030 project pipeline of DRI plants has grown to 94-million tonnes a year, while the pipeline for commercial-scale CCUS on blast furnace-based operations amounts to one-million tonnes a year.

Hence, he argues that there are two realistic low-carbon technology pathways for steelmaking, namely the established DRI-EAF pathway necessitating increased supply of DR-grade ore, and the developing DRI-smelter pathway allowing use of Pilbara ore in low-carbon steelmaking.

“At this relatively early stage of the steel technology transition, it’s already time for steelmakers and iron ore miners like BHP to drop the idea that CCUS will play a major role in decarbonising the steel industry,” Nicholas says.