Mitsui-Kobe Steel joint venture cements Middle East as vital DRI hub, but further efforts are required

Mitsui and Kobe Steel are seeking to reinforce their position in direct-reduced iron (DRI) production in the Middle East with the construction of a low-CO2 iron metallics production plant within the Special Economic Zone at Duqm, in the Sultanate of Oman

The move comes amid ongoing efforts in ramping up DRI and DR pellet production capacity in the Middle East and North Africa region.

The production plant, which is set to be managed by a joint venture (JV) company between Mitsui and Kobe Steel, is expected to commence production in late 2027 with a production capacity of 5 million tonnes of DRI per annum through the MIDREX process.

Plans for a further expansion in DRI capacity are in the pipeline, alongside the construction of a pelletizing plan within the facility, subject to market conditions in subsequent years.

Apart from supplying to Kobe Steel’s steelmaking facility, the DRI plant is expected to supply DRI shipments into other Asian and European markets.

Middle East an ideal location

“The Middle East is not only rich in natural gas reserves required for DRI production, it provides ideal conditions to move towards renewable energy, making it a suitable area for competitive green hydrogen,” Naota Furihata, general manager of the low carbon metallics department at Mitsui told Fastmarkets.

“One of the main considerations behind situating our plant in Duqm was the potential to harness solar and wind energy for our operations,” Furihata added.

Beyond the natural gas supply, a stable supply of raw material feed is also a vital consideration.

The Mitsui and Kobe Steel JV plant in Duqm has ease of access by proximity to pellet supply from Vale Oman Pelletizing, an Oman-Brazil joint venture majority-owned by mining company Vale.

At capacity, the Mitsui-Kobe Steel DRI plant would require 7.6 million tonnes of DR-grade iron ore.

Supply diversification and minimizing risks of raw material shortages will be key issues for the JV to manage to ensure smooth operations, according to representatives from Mitsui and Kobe Steel.

The concern over securing steady supply of DR pellets has been echoed by other market participants in the DRI market.

Global DRI capacity is expected to outstrip DR pellet supply by 19 million tonnes by 2023, according to the International Iron Metallics Association.

Stronger efforts are thus required for the Middle East to shore up its position as a viable hub for the production of low carbon metallics towards green steelmaking.

Representatives from the Mitsui-Kobe Steel venture believe that a consolidated effort in establishing a self-sufficient upstream market, alongside an uptick in end-user demand from global steelmakers will be crucial for the development of the Middle East as a DRI hub.

“Mitsui is also constantly on the lookout for other suitable regions in establishing further DRI projects such as North America, Brazil, Australia or even Malaysia,” Furihata added.

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