Green Steel Corridor: A new way to transform your steel business
Rethinking the world's steelmaking processes brings us one step closer to cleaner steel.
To meet global demand and stop runaway climate pollution, we need to change the way steel is made. Currently, steel accounts for 11% of the world's carbon dioxide.2 Emissions are increasing and demand for this product is expected to increase by 12% between now and 2050.
Clean steel will only be possible through a rapid transition to low-emission production technologies, such as green hydrogen-based methods. To align with the International Energy Agency (IEA) 1.5 °C scenario, an estimated 35 percent of ore-based steelmaking will be made using hydrogen processes (specifically hydrogen-based direct reduction or H2-DRI) 2050.
To effectively decarbonize steel, we need to consider all processes involved in making steel. Crucial to this goal is steelmaking, the most carbon-intensive step in the steelmaking process.
RMI and the Green Hydrogen Catapult (GHC), a coalition of ambitious green hydrogen market leaders, embrace the challenge of decarbonizing the steel value chain and are actively working towards this goal.
Introduction to the green iron corridor
To understand how we get there, we need to understand where we come from. Traditionally, all steel production was done under one roof, with large integrated facilities supporting both iron and steel production, and coal being used as the primary fuel and reducing agent. Cheap coal resources therefore drove the geographic pattern of iron and steel production over the last century, with companies that were quick to take advantage of economies of scale and consolidate into highly optimized facilities gaining an advantage over time. I acquired it.
However, with the advent of greener methods, where the availability and scalability of renewable energy makes them more cost-competitive, steelmaking will be drawn to new regions rich in iron ore and renewable resources (with the new H proven)2-The ongoing DRI project in Sweden, where there is a combination of high-quality ore and cost-competitive wind and hydro energy).it may be proven Splitting these processes is cost-effective and a win-win: Steel production takes place in locations with abundant ore and renewable energy potential, and steel production takes place in other locations where steel production capacity and demand are already in place. This process split opens new markets in ore-rich but steel-making capacity-poor regions, accelerates the global transition to low-emission steel production, and satisfies climate-conscious buyers serious about green steel. You will be able to do it. We call these potential import and export routes the “green iron corridor.”
location, location, location
Strategically selecting import and export locations based on resources and needs will make the business case for the Green Iron Corridor clearer. A significant portion of the cost of producing green steel is determined by the cost of renewable hydrogen, which is approximately 15 to 40 percent of the steel cost. Therefore, locations with cost-competitive hydrogen production and iron ore will have a competitive advantage. Depending on the route-specific trade-offs between the quality of the renewable resource, the cost and distance of maritime transport, and the cost and efficiency of transporting a more finished product of iron rather than iron ore, iron reduction may be carried out at the mining location or at secondary locations. It may take place at any location. Where renewable energy, i.e. reduction, is particularly competitive before the final shipment to the steelmaking center. Current subsidies will enable lower costs for hydrogen-based steel production in today's developed countries, but ultimately supply chains will be optimized around competitive renewable energy sources. Become.
Another important determinant on the export side is iron ore resources. Not all ores are created equal. Typically, DRI operations using electric arc furnaces (EAFs) favor iron ore pellets with at least 67 percent iron content and low concentrations of important impurities such as silica, phosphorus, and alumina. To meet this requirement, ore is often beneficent at the mine to separate iron oxides and impurities to produce concentrate, which is then pelletized. This process is already routinely done around the world, favoring places with high-grade ores such as Canada and Brazil, but it accounts for 20% to 35% of the iron ore mined and refined in the United States. Low-grade ores are also used.
Alternatively, for ores whose specific composition makes it difficult to upgrade to DRI-EAF grade quality, remove impurities from other industries (e.g. ferroalloy production). This downstream processing could provide a second life and an alternative route to using basic oxygen reactors in parallel with DRI. Our cost analysis shows that both options are economically viable, depending on the existing infrastructure, starting grade, type of iron-bearing mineral (magnetite vs. hematite), specific impurity composition, etc. Priority is determined by ore details. Investment is being made in both options among major iron ore mining companies, with Vale, Rio Tinto and Fortescue increasing DR grade pellet production through upstream beneficiation, and Rio Tinto and BHP increasing downstream production. Investing in an ESF pilot facility.
Given these various factors, understanding the most competitive iron ore return locations today requires a comprehensive consideration of subsidies, iron ore quality and management, transportation distances, and renewable resources. there is. RMI, with the assistance of technical advisors and his GHC members, developed techno-economic modeling to identify these cost-competitive regions and evaluate corridor he trade-offs between these factors. . The modeling supports the lowest cost export option using high-grade iron ore co-located with favorable renewable energy resources, with enabling policies to You can produce iron for $390.
As shown in Exhibits 1 and 2, these export destinations include the United States (for IRA subsidies and tax credits), South Africa, Canada (with tax credits), Mauritania, Australia, Brazil, and Chile. will appear. By combining these exporting regions with importing countries with strong steelmaking capacity, heavy reliance on iron ore imports, and demand for green hydrogen to achieve energy security and decarbonization goals, Europe , Japan and South Korea are the top importing regions, allowing for a clear business case for creating a blueprint. In the green iron corridor.
The Green Iron Corridor offers efficiency, cost and growth opportunities across the steel value chain. As countries develop their hydrogen strategies, regions such as North Africa and Australia are emerging as promising green hydrogen exporters, while other regions will rely on imports to supplement domestic production capacity. 2030. If these export and import regions overlap with existing iron ore trade flows, transporting finished raw iron can save both cost and energy compared to transporting hydrogen and ore separately. . This transition will require few infrastructure changes on the transport side, as raw iron briquettes, also known as hot briquette iron (HBI), can be handled and transported using processes similar to existing iron ore and serve as a vehicle for hydrogen trade. there is no need.
Reduce costs, speed migration
The main benefits of the Green Iron Corridor approach for importers are that it reduces costs and enables a faster transition of the steel sector. Importantly, it can help you avoid some of the sex acts at home.2– DRI production infrastructure expenditures required for 1.5°C alignment still provide cost and efficiency savings. At least $5.5 billion in government funding has been earmarked for 10 commercial-scale hydrogen-enabled DRI facilities in Europe, but even with these generous subsidies, companies still face financial hurdles due to the high cost of domestic hydrogen. and are struggling to reach a final investment decision. Instead, companies are already considering importing green steel into Europe from regions with lower hydrogen costs as a way to cost-effectively reduce emissions while maintaining steel production in Europe ( Taking into account government investment of $5.5 billion, transitioning the entire European integrated steel industry to hydrogen-based steelmaking would require $105 billion in capital investment in new steelmaking facilities and associated hydrogen and power production capacity. It is estimated that at least $330 billion will be needed, for a total of $435 billion.
Building the infrastructure to provide around 5 million tonnes of renewable hydrogen production for the transition to integrated steel production will require 250-350 TWh of electricity per year, provided by 150-350 GW of new generation. This is a 10% increase over Europe's current power generation. It uses renewable energy and land-constrained areas ranging from 4.5 million acres to 10 million acres. Instead, by importing raw steel rather than producing it domestically, you can save between 5 and 40 percent on clean steel costs while avoiding some of this infrastructure spending and construction ( Germany is shown in Exhibit 3 as an example of an importing country). These cost savings can be achieved while preserving domestic steelmaking activity, which accounts for approximately 75 percent of direct steel employment.
In Europe, the combination of avid buyers demanding green steel, who are willing to pay a 20-30% premium for green products, and the introduction of a carbon tax are strong prospects for establishing these trade corridors early. It's a business case. As the EU Emissions Trading System (ETS) free quota is phased out and the Carbon Border Adjustment Mechanism (CBAM) is phased in by 2034, the Costs are reduced compared to fossil-based steel imported into Europe (34%). consumption) can also be achieved. For example, compared to domestic fossil-based steel, where an ETS carbon tax is expected, steel produced in Germany from the lowest-cost raw iron imports will cost about the same in 2028 and by 2030. significantly cheaper (up to 20% cost savings). Cost is important, but it's not everything. Other factors such as available skilled labor, geopolitical risks, water and land availability, government support, energy security and equity, hydrogen readiness and enabling policies, and stakeholder engagement are also important. , plays a role in selection. Main export and import locations.
The idea of ​​green iron trade is gaining momentum with interest from local developments in steel incumbents and new companies. However, progress from concept and memorandum to construction and production has yet to be seen. To accelerate the green iron supply chain, RMI and the Green Hydrogen Catapult will bring together extensive sector experience, analytical capabilities and system-level assessments to drive the benefits of corridor networks. Combining our research and supply chain meetings, we aim to begin launching a unique green steel corridor through public-private partnerships. Achieving this requires action across the value chain. Governments need to show intent, steel producers in importing regions need to show appetite, and iron producers and iron ore mining companies in exporting regions need to start building their investment base. The Green Iron Corridor allows you to decarbonize your steel production efficiently and cost-effectively. Now is the time to accelerate the transition.
If you would like to learn more or get involved, please contact Chathu Gamage or Sascha Flesch at cgamage@rmi.org and sflesch@rmi.org.
About Green Hydrogen Catapult:
The Green Hydrogen Catapult aims to transform the world of green hydrogen by increasing production capacity by 50 times, deploying 80GW of renewable energy-powered electrolyzers, and reducing costs by 50% to less than $2 per kg of green hydrogen. We aim to promote the adoption of this technology. The coalition, supported by the United Nations High-Level Climate Champions and RMI, brings together leaders in the green hydrogen market to tackle the challenge of decarbonizing hard-to-electrify sectors. We foster collaboration across the green hydrogen value chain and invite new members to join us in our mission to scale the green hydrogen economy. For more information, please visit https://greenh2catapult.com.