The Institute for Energy Economics and Financial Analysis (IEEFA) has stated that the growing decarbonization of steel production is prompting the four leading iron ore miners to pursue different strategies. Brazil-based Vale and Australia’s Rio Tinto and Fortescue are focusing on increasing supply of higher-grade iron ore that is compatible with green hydrogen-based production of direct reduced iron (DRI), while Australian miner BHP Billiton is more focused on carbon capture, utilization and storage technology, despite the technology’s longstanding record of underperformance.
Much of the focus on the outlook for iron ore naturally emphasizes shorter-term economic performance and steel demand in China, the largest importer of iron ore globally. China is the destination for 85 percent of Australia’s iron ore exports. However, along with declining long-term steel demand and plans for increased scrap recycling, green hydrogen-based DRI is another trend emerging in China. However, DRI production requires iron ore with Fe content of 67 percent or more, which is higher than that used in blast furnaces. IEEFA stated that a global steel industry shift from blast furnaces towards DRI will drive a significant shift in the quality profile of traded iron ore.
The global steel technology shift away from blast furnaces is accelerating, which will lead to a significant growth in demand for suitable iron ore. Noting that the benchmark 62 percent Fe iron ore produced in the Pilbara is not suitable for existing DRI processes and the quality being produced in the last decade has been falling, IEEFA stated that part of the solution will likely be technology combinations that allow the use of blast furnace-grade ore in DRI-based steelmaking
