Australian resources firm BHP will develop an electric smelting furnace (ESF) in Australia, which could use hydrogen to replace the coking coal that it mines in Queensland to process the iron ore it produces in Western Australia (WA).
BHP will work with engineering firm Hatch to design and build a pilot plant for a hydrogen- and renewable energy-fuelled ESF that, when combined with a direct reduced iron (DRI) plant, could process its Pilbara iron ore to make steel. This will be the first time it invests in an iron ore processing plant in Australia since the closure and $266mn write-off of its Hot Brickette Iron Boodarie plant in WA in 2005.
It has been the least proactive of the three big Pilbara iron ore producers, comprising itself, Rio Tinto and Fortescue, in developing "green steel" options. This is partly because of its backing for the long-term use of coking coal in steel production and partly because of the failure of Boodarie.
BHP is one the biggest global suppliers of seaborne coking coal from its BHP Mitsubishi Alliance (BMA) with Japanese trading house Mitsubishi in Queensland, although it has been divesting its lower grade metallurgical coal assets to focus on the highest grade production in its portfolio. BMA put its 12mn t/yr Blackwater and 2.5mn t/yr Daunia mines up for sale last month.
BHP also has an interest in playing the Queensland government off against the WA state government, having linked Queensland's increase in royalty rates to its decision to cut investment and sell assets in the state.
The DRI-ESF steel production route will be able to use the mid-quality iron ores produced in the Pilbara, rather than relying on higher grade ore or concentrates, with carbon dioxide emissions more than 80pc lower than the traditional blast furnace route, according to BHP.
The test programme will de-risk investment in commercial scale projects and complement development plans of BHP's steel customers, BHP said, without saying who will fund the commercial scale projects or whether they will occur in Australia or at customers' existing facilities. It compared it to Sweden's Hybrit project.
Green steel, which uses hydrogen and renewables instead of coal, is seen as a growth opportunity in Australia. The US Inflation Reduction Act has made it more difficult for Australian pure hydrogen projects to attract international investment against their US competitors. But green steel allows Australia to leverage off its abundant supplies of iron ore and its huge capacity to develop renewable energy plants. Australia's relatively low population density and abundant sunshine and strong winds are advantages in renewable energy development.
