The production of “green steel” in South Africa may be a distant dream, but exporting “green iron ore” is achievable in the medium term, according to the materials engineer and head of project innovation. Afriforesight Brandon davoren.

Amid the global trend towards sustainability and in the wake of the twenty-sixth United Nations Conference of the Parties on Climate Change, or COP26, mining companies and steel producers are considering the viability of ‘greening’ the steel industry and, consequently, the iron ore sector.

The global steel industry is believed to account for around 7% of global carbon emissions, with consulting firm Wood Mackenzie saying in August that emissions in the steel sector must fall 75% to limit global warming to within 2 ° C.

This would require a reduction of more than three billion tonnes of carbon dioxide equivalent (CO₂-eq) in 2020 to around 780 million tonnes by 2050.

In a press release, Wood Mackenzie described five results that would need to be achieved to achieve this goal: doubling the use of scrap metal in steelmaking, tripling the production and use of direct reduction iron, reducing the Global average electric arc furnace emissions intensity of 70%, reducing blast furnace – basic oxygen furnace – emissions intensity by 30%, and capture and storage of 45% of residual carbon emissions.

Davoren says that while there can and should be increased recycling of scrap steel, “you eventually get to a point where the premiums and the cost per tonne are so high that raw steel is cheaper,” and price is always a very important determining factor. for manufacturers ”.

“As such, if there are viable and greener ways to produce steel, this is where the industry should be focusing its efforts.”

While the use of carbon capture technologies in steel mills is likely to increase, mainly because many are already tested and ready for commercialization, a significant amount of research appears to focus on reducing iron ore with hydrogen.

Engineering News & Mining Weekly reported last month that the government of Western Australia had committed A $ 1 million to investigate the viability of processing iron ore sustainably into green steel. This followed pledges from iron ore majors BHP, Rio Tinto and Fortescue Metals to pursue green steel initiatives.

Davoren notes that the European steel industry probably intends to systematically produce green steel by 2025. “This would be in relatively small quantities, probably less than ten million tonnes per year, mainly for use in the automotive sector or in specialized sectors a green direction very quickly.

This is evidenced by the fact that automaker Volvo unveiled the first vehicle made with green steel on October 13. The Bloomberg news agency reported that the electric dump truck weighs 8t, has a virtual driver and is intended for quarries and mines.

Davoren adds that, if multinational steel producer ArcelorMittal is successful with its green steel offering in Europe, its South African operations may also consider producing green steel; however, he stresses that such a development could only occur “in the very long term”, given the country’s persistent electricity constraints and its dependence on coal power.

Fortunately, there are many mining companies promoting and promoting renewable energy projects in South Africa, which creates the potential for green iron ore mining – using renewable energy to meet all needs. energy sources of a mine, including the recharging of electric mining vehicles. “

Davoren tells Engineering News & Mining Weekly that South Africa has good iron ore grades for steelmaking, and that even if miners reach areas with lower grades, the material can be upgraded using magnetic separation or flotation by foam.

“Green iron ore would probably pay a premium, in the same sense that green aluminum has a premium for being produced at less than 4 t of CO2 _{per tonne of aluminum.}

He notes that the most difficult aspect of local production of green iron ore is “to actually start the infrastructure plans”.

While Davoren understands the tendency to take the path of least resistance, namely coal, the introduction of CO2 tariffs will cause all production processes to become considerably more expensive.

For example, if ArcelorMittal continues to produce steel from coking coal at a plant using electricity supplied by coal-fired power plants, “it becomes a lot more expensive than you might think if you add all of the these CO2 _{customs duties on the price of steel ”.}

In addition to changing the energy mix at the national level, the country is expected to create “long-term infrastructure plans that focus much further on the future than one might expect.”

Davoren cites, for example, redesigning countries’ plans for hydropower plants, as climate change increases the likelihood of drought, and redesigning transport infrastructure, because mines cannot “continue to transport millions of people. tonnes to ports ”.

Price verification

As reported by Engineering News & Mining Weekly Last month, Fitch Solutions Country Risk and Industry Research expects iron ore prices to follow a multi-year downtrend from 2022, as Chinese steel production slows and producer output global increases.

“Over the longer term, the company predicts that iron ore prices will drop from an average of $ 155 / t this year to $ 65 / t by 2025 and $ 52 / t by 2030, under l The combined effect of lower demand growth and higher supply. item indicated.

Davoren agrees: “From around 2023, despite increasing demand for steel from the recovering automotive sector and due to the increased relaunch of infrastructure projects, including renewable energy projects, the price of iron ore is expected to fluctuate but follow a downward trend, eventually stabilizing as supply and demand balance.

The US Geological Survey notes that 98% of the iron ore produced in the world is used in steelmaking, with Davoren noting that Chinese steel accounts for about 50% of global steel production.

“As such, the demand for iron ore and other components of crude steel production is driven by China, which produces more than 90 million tonnes of steel per month.”

The largest producer of iron ore is Australia, which accounts for around 38% of world production, 60% of which is exported to China.

Davoren adds that BHP recently opened its South Flank mine, which is “Australia’s largest iron ore mine to start production in about 50 years.”

Additionally, Brazil is restarting after successive tailings disasters and strict Covid-19 restrictions and, combined with China’s slowdown in steel production as a way to meet its carbon emissions targets, the carbon market iron ore is surplus.

He comments that China has said that if steel prices rise, it will increase production to calm commodity prices, but ultimately Afriforesight expects the price of iron ore to rise. average less than $ 100 / t in 2022, ending the year at around $ 95 / t.

Fitch Solutions also expects iron ore prices to remain under pressure until 2022, as it estimates Chinese demand to peak in the first half of 2021.

African update

Davoren notes that, despite the price predictions, there is a tendency for Africa-based iron ore industries to start ramping up iron ore production. This trend is mainly due to the record prices of around $ 240 / t recorded in May and China seeking to reduce its dependence on Australia.

He recalls the first shipment of iron ore from Angola since 1976. About 60,000 t came from the Cutato mine, in the province of Cuando Cubango.

“Sierra Leone has also started to move shipments and in other countries like Liberia we have players like ArcelorMittal trying to push production. In Namibia. . . 53,000 t were moved.

Botswana also sent a shipment of iron ore to China in September.

“In the grand scheme of things, these shipments are not very large, especially compared to Australia’s production of over 800 million tonnes per year.” However, he notes that shipments are a good indication that African industries are not stagnating.

“In particular, the markets have become very volatile recently, so the continued profitability of these mines largely depends on the establishment of firm purchase orders. “

For many of these new players, given the price predictions, it might be better to put the mines in a maintenance condition and restart operations when the price improves.

Davoren adds that despite the trade dispute between the two, cuts in Australia’s exports of iron ore to China were negligible.

However, that doesn’t mean that China isn’t looking to diversify its iron ore supplies.

“The Simandou reserve, approximately two billion tonnes, in Guinea, is the largest deposit of high-grade iron ore in the world. There is a Chinese consortium that plans to develop Blocks 1 and 2 to start production by 2025. Blocks 3 and 4 are largely owned by Rio Tinto, which has a 45% stake.

“Rio has been slowly selling its shares, and if this continues, China could hold significant stocks in a massive, high-quality reserve,” he explains.

This would undoubtedly give the country more leverage in future trade disputes with its main supplier of iron ore.

Meanwhile, South Africa, Africa’s largest producer, accounts for 3% of global iron ore production.

Davoren says that in terms of growth potential, there are opportunities for large mines, which is evident in Kumba Iron Ore’s goal of expanding Sishen: “Clearly there is long-term feasibility. term.

Afrimat has also diversified into iron ore and is ramping up at its Jenkins mine in the Northern Cape, while African Rainbow Minerals (ARM) notes that expansions are underway in its iron ore operations .

The main challenge, besides electricity concerns, is logistics.

“ARM and Kumba cited Transnet as a limiting factor. Kumba, in its third quarter production report, said it would slow down production simply because it could not move its volumes to Saldanha Bay.

Davoren says discussions are underway to resolve rail issues – either by improving rail infrastructure or increasing car size – but warns that if these are not addressed, the industry will regress, no matter what. Requirement.

Moreover, if local mining companies are unable to exploit the opportunities presented by decarbonation and green iron ore, it is likely that their long-term profitability, as well as their sustainability and their ability to retain a social license to operate. exploitation, will suffer from their inaction. .