Posted on 10 Nov 2021
The decarbonization of the global steel industry over the coming several decades will change demand for iron ore, boosting interest in higher grade ore and steel scrap, and reducing that for low-Fe iron ore as technology for steelmaking evolves further. Throughout this process of change however, the primary focus of iron ore players will be to help steelmakers reduce emissions, according to Christiaan Heyning, partner of McKinsey & Company.
Addressing AusIMM's Iron Ore Conference 2021 in Perth on November 9, Heyning noted that as steelmakers navigate the lower-carbon change, the iron ore industry will face issues such as a demand shift towards to higher Fe-content products, as well as an overall dip in iron ore demand due to the increased use of scrap. There will also be different regional needs for seaborne iron ore, and the discounts for low Fe or impure ores will increase.
Consequently, iron ore suppliers will need to develop products more suited to low-carbon steelmaking, such as those offering higher Fe content and low contaminants, he suggested. At the same time, suppliers must also set or refine their customer strategies and reduce their own emissions.
Over the longer term after 2030, the role of iron ore players will be more in supporting steelmakers embrace BF-CCS (carbon capture and storage) or H2-DRI (hydrogen-based direct reduction iron) technologies, Heyning predicted. Under these circumstances, iron ore sellers will need to pay attention to the shift in value pools along the steel value chain towards steelmaking, marketing and steel scrap.
They may also face the further reduction in iron ore demand as steel scrap takes an even bigger share of the steelmaking raw materials market, plus a further shift towards to higher Fe content products and "DRI friendly" ores (such as those boasting Si+Al content < 3% and Fe content > 67%), he showed in the presentation.
Iron ore suppliers may need to partner with steelmakers across different regions to establish "green supply chains" via either the BF route - moving to very high value-in-use ores or low-cost ores - or via the DRI route, such as producing DRI-quality ores and moving into DRI production itself. The suppliers will need to think about where they want to play, Heyning observed.
"Do you want to go into processing? Do you want to be a DRI producer, or do you want to be an aggregated or super high Fe ores (supplier)?" he suggested.
In Heyning's view, demand for higher grade iron ore and steel scrap is expected to grow while demand for low-Fe iron ore could decrease.
Demand for BF input materials will be different by product. For example, blast furnace pellets will become preferable while sintering operations will be impacted negatively by environmental regulations, he noted. In parallel, demand for direct-reduced quality materials will increase with the capacity growth in electric-arc furnace steelmaking, creating possible supply constraints for DR pellets.
In passing, he pointed out that Europe will continue to be a net importer of pellets, as the market hosts only two pellet producers, and new DRI/H2 capacity will create additional demand.
In sum, the decarbonisation trend will drive up demand for products such as higher-grade iron ore fines (Fe content > 64%), higher grade iron ore concentrates (Fe content > 64%) for use in blast furnace pellets, while demand for even higher-grade concentrates (Fe content > 67-68%) will climb as DR pellet demand rises in the future, as will that for steel scrap, he predicted.
In contrast, the demand for low- and medium-grade iron ore (Fe content < 64%) and iron ore lumps (Fe content around 62%) is very likely to decrease, he warned.
Source:Mysteel Global
