Middle Eastern steelmakers pave the way for green steel: LME Week

Middle Eastern steelmakers are ramping-up their efforts to reduce carbon emissions, taking several bold steps toward this goal

The region is increasingly being cited as an emerging leader in the international green steel revolution, which will be a key discussion topic for the London Metal Exchange’s annual LME Week event, to begin on Monday September 30.

Fastmarkets rounds up the key milestones.

Overview

The Middle East has an advantage in green steel production due to its rich natural gas reserves and ideal conditions for renewable gas production.

The Carbon Border Adjustment Mechanism (CBAM) being brought in by the EU is expected to emphasize this advantage, allowing Middle Eastern steelmakers to secure market share, with some other regions struggling to compete on green credentials.

CBAM was announced in 2021 in a package of proposals under the EU Green Deal. It is a tool intended by the EU to put a fair price on the carbon emitted during the production of any carbon-intensive goods that enter the bloc.

The CBAM transition period began on October 1, 2023. During this phase, which will run until the end of 2025, the EU authorities will test the mechanism without imposing any duties, with full implementation to be phased in between 2026 and 2034.

2024

There is an investment plan for a green steel producer in the UAE with a production capacity of 6 million tonnes per year of crude steel. The project is at the approval stage, and its details have yet to be announced.

Steelmakers in the Middle East-North Africa (MENA) region could capitalize on advantages over competitors to take the lead in the global race to produce green iron and steel, the Institute of Energy Economic and Financial Analysis (IEEFA) said in a report published on September 19, 2024.

The technology to blend green hydrogen with gas can support the development of MENA steel plants with direct-reduced iron-electric-arc furnaces (DRI EAFs) toward low-emission production without costly modifications, according to the institute’s analysis.

Emsteel Group (formerly Emirates Steel)

UAE’s Emsteel Group has been appointed co-chair of the Alliance for Industry Decarbonization (AFID), led by the International Renewable Energy Agency (IRENA), Emsteel announced on September 26. Emsteel Group will be co-chairing the alliance alongside Siemens Energy, replacing Tata Steel in the alliance leadership role.

Persian Gulf Steel Industries (AGSI)

AGSI, a maker of long-steel products based in Abu Dhabi, has achieved net-zero carbon emissions from its plant, a company executive told Fastmarkets on July 30, 2024. The company produces 600,000 tpy of rebar from 100% local supplies of steel scrap and has investments in carbon-reduction technologies.

Essar Steel

Essar Steel has reached the approval stage for a plant in Saudi Arabia that would have capacity for 4 million tpy of green flat steel, although details have yet to be released, a company spokesperson told Fastmarkets on June 26, 2024.

Volkswagen

Global carmaker Volkswagen is planning to buy as much as 300,000 tpy of low-carbon steel from Oman-based Vulcan Steel by 2027, the Germany-based company said on June 12, 2024.

Volkswagen and Vulcan Green Steel (VGS) have signed a Memorandum of Understanding (MoU) for a partnership for the supply of low-carbon steel, the carmaker said. VGS’s low-carbon steel was expected to reduce the carbon emissions from steel production by 70%, Volkswagen said.

Emsteel

Emsteel has signed a Memorandum of Understanding with Italian equipment supplier Danieli, it said on June 6, 2024. The MoU “outlines a collaborative project to test a pilot electrical process gas heater at our Direct Reduction Plant 1,” Emsteel said. This technology was intended to enhance efficiency and sustainability in the production process.

Emsteel has also signed an agreement with China’s Delong Steel Group to build a factory for low-carbon raw materials for steelmaking, the former said on June 3, 2024.

In addition, Emsteel signed a five-year contract worth $2 billion for the supply of iron ore pellets from Bahrain Steel, the two companies said in a joint statement issued on January 17, 2024.

2023

The MENA region has the potential to become a leading ‘green steel’ hub, according to a report by the US-based Institute for Energy Economics & Financial Analysis (IEEFA) published on November 16, 2023.

Abundant solar energy and sources of natural gas in the MENA region will be an obvious advantage in the drive to reduce carbon emissions, according to members of the Chief Executive Officers’ panel discussion group at Fastmarkets’ Middle East Iron & Steel Conference in Dubai on November 20, 2023.

“Emirates Steel Arkan [now Emsteel] hopes to reach its zero [carbon] emissions target by 2050. The United Arab Emirates has a ‘Net-Zero 2050’ strategic initiative, and Emsteel has [already] taken several steps to reduce its carbon emissions,” Saeed Al Ghafri, the company’s chief executive officer, said.

“[About] 8% of carbon emissions globally are because of the steel industry, and we need a technological shift to reduce emissions,” Harsha Shetty, CEO at Oman’s Jindal Shadeed Iron & Steel, said.

“We are in the preliminary stages of green hydrogen production, but we have other solutions here in the Middle East. We can switch from gas-originated energy to green energy, and we are working on that at the moment,” Rafic Daou, chairman of Egypt’s LITAT Group and Suez Steel, said.

The EU’s Carbon Border Adjustment Mechanism (CBAM) entered the transition phase of its implementation on October 1, 2023, and the duties are scheduled to be applied from January 1, 2026.

“We have a geographic advantage compared with the rest of the world, because of our vast resources of solar energy,” Rewant Ruia, director at Essar Group, said. Essar is investing in a green steel plant in Saudi Arabia and recently signed contracts to secure renewable energy.

“The problem is that if we use green hydrogen, the additional production costs will be about $140 per tonne,” Ravi Singh, CEO at Sulb Steel, said. “Unless there is policy support provided by governments – such as tax reductions – the commercial point of view is difficult. Carbon capture is cheaper in this region compared with green hydrogen production.”

VGS

“Vulcan Green Steel (VGS) in Oman will establish a fully integrated green hydrogen-ready steel plant, producing 5 million tpy of green steel with approximately 85% fewer CO2 emissions than the current global average, before the end of the decade,” Jindal Shadeed Iron and Steel said in November 2023, noting that the project is “scheduled for completion by 2026, and with production starting in 2027.”

Abu Dhabi Future Energy Company PJSC (Masdar)

Masdar, one of the world’s leading renewable energy companies, partnered with Emsteel to develop a green-hydrogen project to decarbonize the hard-to-abate steel sector in the country, ESA announced on November 22, 2024. Located in Abu Dhabi, the project will be the first of its kind in the MENA region. It is currently in the installation phase.

“Electrolyzers have already been delivered to the site to help produce green steel. Expected to be commissioned in early 2024, the project will demonstrate the use of green hydrogen, instead of natural gas, to extract iron from iron ore, a key step in steelmaking,” Emsteel’s announcement said.

The facility will be an important step in enabling the UAE’s strategy of making the country one of the world’s largest hydrogen producers by 2031.

Essar Steel

Integrated steelmaker Essar Steel signed an agreement with Desert Technologies to develop renewable energy solutions for its green steel project to be built in Saudi Arabia, it said on September 12, 2023.

Vale International

Vale International, a wholly owned subsidiary of Vale SA, signed a Letter of Intent (LoI) with Essar Steel for the supply of iron ore agglomerates comprising direct-reduction-grade pellets and briquettes, the latter company said on September 7, 2023.

Bahrain Steel

Bahrain Steel will supply 4 million tpy of direct-reduced (DR) iron ore pellet to India’s Essar Group for its Green Steel Arabia (GSA) project at Ras Al Khair, Saudi Arabia. The two parties signed a Letter of Intent (LoI) on August 16, in Jubail, Saudi Arabia, Bahrain Steel told Fastmarkets on August 17, 2023.

Vulcan International Holding

Vulcan International Holding, the owner of Oman’s Jindal Shadeed Iron & Steel, is investing in a pilot carbon-capture plant at the JSIS unit in Sohar, which was expected to be completed by the end of 2024.

Emsteel

Emsteel signed a Memorandum of Understanding (MoU) with Abu Dhabi-headquartered AD Ports Group and Japan’s JFE Steel and Itochu Corp, for a project that “aims to produce low-carbon emissions raw materials for use in steelmaking [to] meet the growing demand for environmentally friendly steel products while [at the same time helping the UAE achieve its] ‘Net-Zero 2050’ strategic initiative,” Emsteel said on July 18, 2023.

Emsteel also signed a Decarbonization Strategic Collaboration Agreement with Norway-based certification, assurance and risk management provider DNV, the European company announced on May 30, 2023.

Emsteel decreased its carbon emissions in 2022 while increasing its production and sales, the company said on March 5, 2023. It has decreased its emissions intensity across its steel businesses by 19% compared with previous years. It also signed on to the UAE Climate-Responsible Companies Pledge and ramped-up energy efficiency efforts during 2022, CEO Saeed Al-Remeithi said.

Emsteel also purchased clean energy certification for solar and nuclear energy totaling 7,272,000GJ, which represented 13% of the total direct and indirect energy consumed by the company’s steel businesses, Al-Remeithi said.

The company is the first steelmaker in the world to capture its carbon dioxide emissions and the first manufacturing company in the Middle East – as well as among the first 50 companies in the world – to be verified for Leadership in Energy and Environmental Design (LEED) green building system documentation.

Emsteel partnered with Abu Dhabi National Oil Co (ADNOC), for which its Al Reyadah carbon capture, utilization and storage (CCUS) facility processes the CO2 captured from Emirates Steel Arkan operations, to ultimately enhance its oil recovery. Meanwhile, feasibility studies continue for the construction of a ferrous raw material production facility in Abu Dhabi. Emirates Steel Arkan entered talks with Japanese entities Itochu and JFE Steel, a subsidiary of JFE Holdings, to consider building the unit that would be an integral part of a global supply chain for the production of low-carbon-emissions iron, the steelmaker said in September 2022.

Learn more about Fastmarkets Middle East Iron & Steel, the region’s largest iron and steel trading event, where 1,000+ senior international executives come together to meet, discuss and get the latest insights into the market.

2022

In September 2022, the Institute for Energy Economics and Financial Analysis (IEEFA), a US-based energy finance analyst, said that the MENA region is in a very advantageous position to begin production of carbon-neutral green steel.

The Middle East’s geopolitical position and advantages in green steel production will result in increasing exports from the region in the coming years, according to panelists at Fastmarkets’ Middle East Iron & Steel Conference in Dubai in December 2022.

Uninterrupted and low-cost energy sources such as natural gas and the Middle East’s geographical position between Asia and Europe give the region – and especially the countries in the Gulf Co-operation Council (GCC) – an advantage when it comes to increasing steel exports, according to Ankur Dana, chief executive officer at United Arab Emirates-based coated coil producer Dana Steel.

In addition to exports outside the Middle East region, steel consumption is likely to increase in the Middle East, especially in Yemen, Iraq and Syria, because of reconstruction activities, according to Abu Bucker Husain, CEO at UAE-based coated coil producer Al Ghurair Iron & Steel.

The panelists also discussed the use of hydrogen for steelmaking and agreed that this will take time because it adds about $200 per tonne of additional costs. Panelists at the conference’s keynote session also agreed that the use of hydrogen needs to be commercially viable before it becomes common for producing steel.

Jindal Shadeed Iron & Steel

Oman’s Jindal Shadeed Iron & Steel signed an agreement with Hydrogen Rise and Sohar Port and Freezone for green hydrogen production in Sohar in April 2022.

The deal will decarbonize the steel production process at Jindal Shadeed’s steel manufacturing plant. The partners in the agreement will assess the potential of producing steel in a completely sustainable manner to reduce emissions, lower Jindal Shadeed’s carbon footprint, and preserve gas reserves for other applications across the country, German green energy firm Hydrogen Rise said.

In December 2022, Jindal Shadeed Iron & Steel’s CEO Harssha Shetty told Fastmarkets that it will market most of its green flat steel production to the European and Japanese automotive sector and Gulf Co-operation Council (GCC) markets when the investment is completed.

“We have already signed the memorandum of understanding with the government of Oman for land and gas allocation. The company’s new green hydrogen-ready steel investment to produce flat steel products will have a thin slab casting and rolling facility, the first of its kind in the GCC region, and will produce auto-grade steel. Automotives, wind energy sector and white goods will be the sectors targeted,” Shetty said during an interview on the sidelines of Fastmarkets’ Middle East Iron and Steel Conference in Dubai on December 13.

European automakers are targeting a significant reduction in carbon emissions by 2030, with the region needing more that 60 million tpy of green steel by that time.

Jindal Shadeed Iron & Steel also plans to invest more than $3 billion to build a green steel plant in Oman, the company said on December 4, 2022.

The green steel production facility, which will be built at the Special Economic Zone at Duqm (Sezad), Oman, will produce 5 million tpy of green steel. It is planned to be completed in 2026, JSIS Oman said.

The plant will use renewable hydrogen-powered energy for steel production and will target the wind turbine, auto and consumer goods sectors across Europe, Japan and other countries.

Essar Steel

Essar Steel’s flat steel mill project in Saudi Arabia targets 40% lower carbon emissions, Essar Steel announced in December 2022.

Vale

Brazilian iron ore producer Vale wants to expand its presence in the Middle East while also reducing the carbon footprint in the region by jointly developing industrial complexes that will use low-carbon hot-briquetted iron (HBI) and other steel products, the company said on November 1, 2022.

Three memorandums were signed with Saudi Arabia, Oman and the UAE in October 2022 to significantly cut the carbon dioxide emissions of steel raw material supplied to local clients, the miner added.

Emsteel

Decarbonization is a key strategic objective of Emsteel, the biggest steel-producing group in the UAE, according to chief executive officer Saeed Al-Remeithi.

In an interview with Fastmarkets in May 2022, Al-Remeithi said that 75% of steel manufactured globally uses CO2-intensive processes, while Emsteel uses a DRI process that has a 50% smaller CO2 footprint.

“Many countries are announcing DRI-based projects and, once these projects come onstream, the demand for pellets will increase. However, raw materials are a commodity, so the demand-supply gap will drive additional production capacities. It is too early to predict how the markets will respond but we might witness some short-term volatility in supply and prices,” he added.

Emsteel linked with Japan’s Itochu and JFE Steel, a subsidiary of JFE Holdings, to consider the construction of a ferrous raw material production facility in Abu Dhabi, the company said on September 26, 2022.

The unit would be an integral part of a global supply chain for the production of low-carbon-emissions iron. Production of the raw material was expected to use an enhanced decarbonization process initially using natural gas to reduce iron ore. The project will also use renewable energy sources, as well as ultimately using green hydrogen for the reduction process, Emsteel said.

2021

India-based Essar Steel signed a Memorandum of Understanding with Saudi Arabia’s industry minister for the construction of a hot-rolled coil manufacturing unit, the Middle Eastern country’s National Development Center (NDC) said on October 27, 2021.

More steps are expected to be taken for decarbonization efforts in the Middle East region in the coming days.

Keep up to date with all the latest LME Week insights with our content hub and explore the in-depth insights, news updates and expert commentary from Fastmarekts.

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