At the heart of this struggle lies the production of iron in a way that is economically feasible and low-pollution, with signs pointing to hydrogen-based iron briquettes (green hot-briquetted iron) as the next game changer, sources said.
Billions of dollars are now being poured into the decarbonization of steel, with major Brazilian iron ore miner Vale in the midst of building green briquette megahubs in the Middle East, while also pushing similar projects in Brazil and North America through collaborations with green steel producers like H2 Green Steel.
Elsewhere, Green Steel of West Australia is also developing a green hydrogen-powered facility to produce green steel from iron ore, while Lincoln Minerals is looking to produce 5-10 million tonnes of magnetite concentrate annually to support Australia’s drive to position itself as a key producer of green iron.
HBI is a pre-reduced iron product that can be used as a feedstock in electric arc furnaces (EAFs), which is a steelmaking process with lower carbon emissions as opposed to traditional blast furnaces. HBI becomes a cornerstone of the green steel transition when produced using green hydrogen.
But the economic viability of green HBI is dependent on multiple factors, according to green hydrogen developer CWP Global’s chief product officer Bobby Pecotic.
A cost conundrum
Among the challenges is the cost of green hydrogen. While it offers a zero-emission alternative to fossil fuels, its production is currently more expensive than grey or blue hydrogen, and significantly pricier than natural gas, which directly contributes to the increasing price of green HBI, according to Pecotic.
Green hydrogen, or “clean” hydrogen, is produced by using clean energy from renewable energy sources, such as solar or wind power, compared with grey hydrogen, which is captured from natural gas or methane, but without the use of carbon capture and storage technology to reduce carbon emissions. Hydrogen is labelled as blue when the carbon generated from steam reforming is captured and stored underground.
“HBI is created by reducing iron ore using a reducing agent, which can be either natural gas or hydrogen. While natural gas is a cheaper option, it generates substantial carbon emissions. Green hydrogen, on the other hand, produces zero emissions during the reduction process but comes at a higher price tag,” Pecotic said.
“Assuming a hypothetical scenario where green hydrogen costs $2.50 per kilogram and natural gas costs $8.00 per million British thermal units (MMBtu), the cost of producing HBI using green hydrogen is significantly higher than using natural gas. This price gap poses a significant challenge to the widespread adoption of green HBI,” he added.
Supportive government policies
Many countries are implementing policies like carbon taxes, subsidies and mandates for green fuels, to accelerate the transition to a low-carbon economy. These measures are gradually narrowing the price gap between green and traditional production methods.
The European Union (EU), for one, is at the forefront of these efforts.
“The bloc has introduced ambitious climate targets and is imposing carbon taxes on various industries, including steelmaking. Additionally, the EU has mandated the use of green fuels in sectors like aviation and shipping. These policies are creating a more favorable environment for green hydrogen derivatives,” Pecotic said.
Geographical advantage
Apart from supportive governmental policies, the geographical location of HBI production facilities can also significantly impact overall costs. Regions with abundant renewable energy resources like wind and solar power can produce green hydrogen at lower costs due to the decreasing price of renewable energy technologies.
The cost of onshore wind-generated electricity fell by 70% between 2009 and 2019, with the price of electricity from solar power falling by 89% in the same period, according to the World Economic Forum, which used supporting data from research and data publication OurWorldinData.
“Northwest Africa, for example, is emerging as a potential hub for green hydrogen production. The region boasts exceptional wind and solar resources, which can be harnessed to produce green hydrogen at competitive prices. This, in turn, can make green HBI produced in the region more cost-effective,” Pecotic said.
Transporting hydrogen over long distances is another obstacle to overcome. While hydrogen can be transported in various forms, including gaseous and liquid. This means that iron is likely to be reduced where the hydrogen is produced, such as in places like Northwest Africa.
The road ahead
While ferrous scrap is a low-carbon alternative to iron ore and is widely used in the steel industry, given that it is generally cheaper and more readily available than iron ore, its supply is limited. As the demand for scrap increases, its price is likely to rise in tandem, making HBI a more attractive option, sources told Fastmarkets.
But several challenges still need to be addressed on the green HBI front. These include reducing the cost of green hydrogen production or further regulations on carbon emissions, improving hydrogen transportation infrastructure and developing innovative technologies, all of which are factors that are crucial for the widespread adoption of this low-carbon steelmaking process, sources said.
Looking ahead, the growing pressure to decarbonize the steel industry, coupled with supportive government policies, is creating a favorable environment for green HBI, which is posed to play a pivotal role in shaping the future of cleaner steel production.
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