We spoke with Vincent Chevrier, general manager of Midrex Technologies, about the role of HBI in the steel industry's decarbonization process and the future of the global DRI/HBI market. Chevrier shared his insights on the regional distribution of new DRI/HBI investments, raw material supply and logistics conditions.
HBI is increasingly being discussed as a key raw material for the steel industry's transition toward lower-carbon production. What are the main advantages of HBI compared to traditional metallics such as scrap and pig iron, particularly in terms of emissions, operational efficiency and production costs?
HBI is an ore-based metallic used to supplement scrap in EAFs, similarly to pig iron. The EAF charge make-up can be a blend of all three, each with their advantages and limitations. A value-in-use model is typically used to balance availability, cost, furnace efficiency, desired melted steel composition, and CO2 emissions.
The primary advantages of HBI compared to scrap are (1) bulk density, and (2) certified composition (specifically carbon and low tramp elements like copper), making EAF melting more predictable and efficient.
Compared to pig iron produced in coke-based blast furnaces (such as in Russia, Ukraine and India), HBI has an embodied carbon of around half, resulting in significantly lower CO2 emissions in the EAF. This will have a significant impact in regions with carbon import restrictions.
Both HBI and pig iron are traded commodities. Pricing is based on commodity pricing, availability and transportation costs. Production costs for HBI are primarily driven by high-grade iron ore and natural gas, whereas pig iron is driven by lower-grade iron ore and coke prices. The trade flows are also different; since the war in Ukraine, a significant portion of pig iron has been removed from trade; HBI trade is currently restricted due to shipping restrictions in the strait of Hormuz.
[note: efficiency is difficult to compare because it is a strong function of the EAF melting practice, more than the use of HBI and pig iron]
As EAF-based steel production expands globally, how do you expect the role of HBI in the metallics mix to evolve? Could HBI become an increasingly important complement to scrap as mills seek to produce higher-quality steel with lower emissions?
Fundamentally, the role of HBI will remain the same: it is used to supplement scrap in EAFs. However, as more industrialized countries are moving to EAFs to produce high-end steel products with scrap, the amount of HBI will increase in the EAF charges to dilute tramp elements in scrap, since the requirements for high-end steel products are more stringent. Additionally, prime scrap scarcity and trade restrictions will likely limit the amount of scrap available for EAFs, thus increasing the need for ore-based metallics in applications that may not necessarily need them solely for chemistry control. For example, the EU currently exports a large amount of prime scrap to Turkey; this flow is very likely to diminish in the near future as EAFs are being built in the EU.
A significant number of new DRI/HBI projects have been announced around the world in recent years. Which regions do you expect to drive actual DRI/HBI capacity growth over the next five to ten years, and how much of the announced capacity do you realistically expect to materialize?
The ironmaking and steelmaking industry is moving towards electrification and decarbonization. This trend is moving at different speeds across regions, driven by energy availability, industrial policy, steel demand and economics. The shift in ironmaking is primarily driven by industrial countries moving from blast furnaces to electric furnaces (EAFs or ESFs). DRI/HBI offers a proven technology to immediately reduce embodied carbon in half, with a clear path to further reduction when hydrogen becomes economically viable. The demand for ore-based metallics (OBMs) will increase in countries like Japan, S. Korea and the EU, following a model more like the US, which is using scrap + OBMs in EAFs.
Production of HBI/DRI will need to meet demand. As direct reduction operating costs are primarily driven by iron ore and energy costs, the regions that have low-cost energy (and future low-cost hydrogen) and favorable logistics for both iron ore and DRI shipments will be at a significant advantage. The Middle East, North Africa and the southern US are seeing significant growth in DRI production at the moment, and we expect this trend to continue.
Historically, much of the world's DRI production has been concentrated in countries such as India and Iran. How do the new generation of DRI/HBI projects being developed in the GCC, Europe and North America differ from these established production bases in terms of technology, scale, feedstock and end-use strategy? Both Iran and India are producing mostly cold DRI for domestic or regional production of steel, taking advantage of local iron ore and energy. India produces a form of DRI (sponge iron) in rotary kilns using coal; this process has very high CO2 emissions. Both countries will continue to have a large share of the world DRI production for the foreseeable future.
However, other regions like the GCC, North Africa, North America and Europe are ramping up DRI production focusing on efficiency (HDRI and/or HBI) and hydrogen readiness. Algeria is now the fourth largest DRI producing country. Large plants with multiple DRI units are under construction or being planned, like Tosyali in Libya.
The driving forces differ by region and even by producers. The GCC and North Africa are expanding both domestic steel production and DRI/HBI for export to the EU and JKT[JF1] . In North America, DRI is increasingly needed for domestic high-grade steel production in EAFs, rather than for export. Big River Steel in the US will produce both HDRI for use in an [JF2] adjacent EAF and HBI for trade.
European projects are mostly driven by decarbonization, either to maintain existing industrial basins or to take care of unique energy sources (like hydropower in Sweden or nuclear power in France). Both greenfield and brownfield projects are integrated or adjacent to steel plants that will consume a large share of the produced DRI in electric furnaces; the DRI will be charged hot to lower power consumption and therefore emissions.
The GCC is emerging as an important location for new DRI and HBI investments. What gives the region a competitive advantage, and could the GCC eventually develop into a major global export hub for merchant HBI?
Abundant and low-cost energy - in the form of natural gas - is the primary competitive advantage. Most countries in the region also benefit from favorable logistics to the EU and Southeast Asia. Very large hubs are emerging to take advantage of the synergies and scale needed for iron ore pellet production, DRI production, available land, and large, modern ports.
Another factor is the potential for large-scale, cost-competitive production of green hydrogen from solar and wind power. While the infrastructure is still nascent today, there is political support to develop the hydrogen industry.
HBI is the perfect vector to ship energy: the conversion of iron oxide to metallic iron is the most energy intensive step in the production of steel. Rather than ship energy (like liquified NG, Compressed hydrogen or Ammonia), the energy embedded in HBI is being transported in a very stable, easily storable product.
Europe is also pursuing DRI-based steelmaking as part of its decarbonization strategy, but high energy costs remain a major concern. How competitive can European DRI production be compared to production in regions with access to cheaper natural gas and renewable energy?
Each EU country has a very different energy profile, and some areas like Sweden, France and the Iberian Peninsula can produce decarbonized energy competitively compared to the GCC. But the production of DRI in Europe follows a different logic than purely competing with the GCC on cost alone. DRI is one part of an overall decarbonization strategy, along with electrification using EAFs and scrap. In some cases, maintaining existing downstream production facilities allows the steelmaker to produce steel in the vicinity of its customers to facilitate circularity. Measures like CBAM are meant to maintain industrialization and employment.
Logistics remains one of the challenges for expanding international DRI/HBI trade. What are the main transportation and handling constraints today, and to what extent can these challenges limit the development of the merchant market?
As an intermediate product to steelmaking, logistical costs can significantly impact the price of delivered HBI and reduce the margins for a producer. Favorable logistics is a key component to the success of a DR plant, especially for a merchant HBI plant, both for inbound raw material and outbound products, all the way to the steel mill.
The supply chain must be efficient at every step: (1) from large, deep ports to load and unload larger vessels, (2) carefully designed material handling to minimize product deterioration (fines/re-oxidation) and (3) storage (re-oxidation). As a compacted form of DRI, HBI offers significant advantages over cold DRI: very limited re-oxidation and yield losses due to fines generations. As such, HBI can be shipped internationally under easier regulations.
Locations with good logistics and the necessary low-cost energy were traditionally limited. Natural gas liquefaction and hydrogen (from decarbonized electricity) are opening more regions. The recent events in the Strait of Hormuz have highlighted the impact of logistics - in this case sea freight - on the HBI trade, and considerations for supply chain resilience and diversification.
The availability of DR-grade iron ore pellets is often highlighted as a potential bottleneck for the expansion of DRI production. Do you expect global DR-grade pellet supply to grow fast enough to support the new DRI/HBI capacities currently being planned?
Indeed, most supply-demand models are predicting a shortfall of DR-grade pellets. But I remain optimistic and believe that the iron ore/HBI market will remain in relative balance even as DRI production grows.
First, not all DR plants require “DR-grade pellets”. The term is misleading: the requirement - especially the iron content - is not dictated by the DR process itself, but rather by the ability of the furnace to handle the gangue components. MIDREX feeding electric smelting furnaces like ThyssenKrupp do not require DR-grade pellets.
Second, the 67 percent iron requirement is historical for EAFs using near 100 percent DRI. As the use of HBI increases in EAFs that have access to scrap, the requirement can be lowered.
Third, a portion (but not all) of the pellet feed used for BF pellets today can be converted to higher grades. This is a techno-economic optimization that mining companies can make.
Hydrogen is central to many long-term plans for low-carbon DRI production, particularly in Europe. From a technological and commercial perspective, how realistic is the transition from natural gas-based DRI to increasingly hydrogen-based production over the coming decade?
We believe the transition to hydrogen-based direct reduction will be gradual and will vary by region, depending on hydrogen availability, infrastructure and economics. This is precisely why we developed MIDREX Flex technology. It allows producers to begin operating with natural gas today while incorporating the design provisions needed to increase hydrogen use over time. The objective is to give steelmakers a commercially viable solution today with a defined pathway toward lower emissions as market conditions evolve.
