Four key takeaways from the 27th International Iron Ore forum

Green premiums, reducing Scope 3 emissions and the quest for high-grade iron ore were among the key topics discussed at the 27th International Iron Ore forum in Stockholm

More than 260 delegates from around the world gathered to network and share their insights on the iron ore industry’s involvement in the global decarbonization movement.

Here are four key things we learned at the conference:

1. Green premiums are here to stay

Despite a dip in premiums for high-grade iron ore due to poor steelmaking margins worldwide in 2022, most delegates at the Iron Ore Forum believe green premiums for steelmaking will be a permanent presence in the steelmaking industry.

Green premiums are defined as the value that a customer will allocate to a product’s environmentally friendliness beyond its basic production cost, according to Thomas Apffel, Rio Tinto’s general manager for steel decarbonization in the Atlantic.

Green premiums may be applied to any product across the steelmaking supply chain, from iron ore cargoes to finished steel products.

As the steelmaking industry continues to refine its approach to valuing green products, most market watchers are confident that the market is ready to manage the additional costs for low-emission products.

“It is clear that green premiums must go up to compensate for the increasing costs of green capital investments over the years,” François Lavoie, Champion Iron’s vice president of sales, technical marketing and products development, said.

It is clear that green premiums must go up to compensate for the increasing costs of green capital investments over the years.

The burden of higher costs for green iron ore is expected to be undertaken by consumers, taxpayers and shareholders. Most of them have shown a willingness to pay higher prices for products with a lower carbon footprint, according to Paulo Carvalho, a partner at Environmental Resources Management (ERM).

Most delegates, however, believe that the global steelmaking industry would require regulatory support to bridge existing gaps. These could be in the form of carbon-related pricing mechanisms and further incentives.

The prospects of a unified global carbon tax system remain elusive for now, according to Stefan Lundewall, vice president of strategy and business development in Luossavaara-Kiirunavaara Aktiebolag (LKAB).

2. Direct-reduced iron (DRI) remains the most viable mid-term solution for reducing Scope 3 emissions

Various panel discussions and presentations at the conference revolved around the industry’s pursuit of ramping up DRI production capacity in the next decade.

While some miners – such as Vale – have presented low-emission solutions to the iron ore sintering process in the form of its cold agglomerated briquettes, the common consensus toward low-emission steelmaking remains deeply rooted in the direct-reduction process.

Miners such as Champion Iron, Samarco and Anglo American each highlighted their expansion plans for supplying the DR-grade supply chain with iron ore pellet feed and iron ore pellets.

Other miners, such as Baffinland and J&F Mining, emphasized the role of lumpy ore as a vital feed in DR shafts.

Iron ore major Rio Tinto identified utilizing its high-grade iron ore supplies from Iron Ore Company of Canada (IOC) for DR-grade ore production as part of its emerging pathways toward steel decarbonization.

Rio Tinto is in the midst of exploring partnerships in future net zero hubs for DRI production, according to Simon Farry, head of steel decarbonization for Rio Tinto.

Rio Tinto is simultaneously exploring the potential of combining hydrogen-reduced DRI with an electric melter as an alternative to the beneficiation of its Pilbara ores.

In a presentation to introduce Vale’s iron ore briquettes, Guilherme Reinisch, Vale’s global head of iron ore green briquettes, said that the miner is in the midst of conducting trials for its direct reduction briquette as a substitute for DR lumps and DR pellets.

3. DR-pellet supplies will be increasingly contested

With the share of crude steel produced by electric arc furnaces (EAFs) in the world expected to reach up to 50% by 2050, anticipated DRI consumption is predicted to surge in tandem.

Delayed investments in scrap systems render DRI as the most viable near-term alternative in the next decade, according to Rafael Buzetti, head of sales for Samarco in Europe, the Middle East and Africa.

Growth in global DRI capacity is expected to outstrip DR-pellet supplies with a deficit of up to 19 million tonnes by 2032.

An additional 140 million tonnes of DR pellets or other forms of raw material is required between 2030 to 2050, according to Adrian Doyle, an expert with McKinsey & Company.

Doyle from McKinsey & Company also added that the uptick in DRI capacity in natural gas hubs such as the Middle East is expected to result in concentrated import demand for DR-grade pellet feed and pellets.

In a landscape of supply scarcity against a strong demand for direct-reduced products, premiums on DR-grade pellets are expected to remain supported in the long run.

4. Decarbonization in the steel industry could revolutionize existing iron ore shipping routes

The global decarbonization movement will result in a pivot away from traditional coal-based methods of steelmaking toward more integrated steel hubs such as those in China and Europe, according to Simon Farry, head of steel decarbonization for Rio Tinto.

One of the main impediments to the wider use of renewable energy in steelmaking, he added, was the challenge of large-volume transportation and the inherent costs that this carries.

The relatively low cost of shipping iron ore establishes a suitable environment for the separation of the ironmaking and steelmaking process.

Iron ore can be transported to hubs with abundant renewable energy sources for further processing before being shipped onward to downstream steelmaking hubs, according to Thomas Apffel, Rio Tinto’s general manager for steel decarbonization in the Atlantic.

What to read next
The US government will impose tariffs on steel and aluminium shipped from Mexico that were made elsewhere, in a bid to curb trans-shipment and excess production, the White House said in a statement on Wednesday July 10, a move widely applauded by the pair of metals industries
Here are the key takeaways from market participants on scrap metal prices, market confidence, inventory and more from our July survey
The United States-Mexico-Canada Agreement (USMCA) has positively affected the automotive sector in the four years since its implementation and automakers are increasingly investing in zero-emission and hybrid vehicles, according to the US Trade Representative (USTR)
Fastmarkets invited feedback from the industry on the pricing methodology for its MB-IRO-0004 pig iron import, cfr Gulf of Mexico, US assessment, via an open consultation process between May 24 and June 24, 2024. This consultation was done as part of our annual methodology review process.
A low-carbon world will still need steel that can satisfy the diverse demands of a variety of downstream sectors, Frederik Leus, of ArcelorMittal’s Xcarb Business Development section, said in an address to Fastmarkets’ International Iron Ore and Green Steel Summit, being held in Vienna, Austria, on June 25
The decline in crude steel output in the first five months of 2024 dragged down Chinese ferro-alloys markets, including ferro-silicon and silico-manganese, sources told Fastmarkets on June 21