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Oxford Business Group

Oxford Business Group

Oxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of the Middle East, Africa, Asia…

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Can MENA Capture A Share Of The Green Steel Market?

  • Steel production generates 7% of annual global greenhouse gas emissions.
  • Clean power generation could replace coal in smelting.
  • MENA region set to boost investment in green steel production.
  • Gulf countries also looking to harness green hydrogen to power steel plants.
Green Steel

As the global industrial sector seeks to shrink its carbon footprint, a number of MENA countries are investing in green steel production to capture market share and help meet emissions targets.  

Despite generating 20% of global greenhouse gas emissions, industry has been slow in adopting carbon-efficient manufacturing technologies. Steel is the manufacturing segment with the largest emissions, accounting for 7% of global emissions annually due in part to a reliance on coal to heat smelting furnaces.

The world produced nearly 2bn tonnes of steel in 2021, more than half of which was made in China, by far the world’s largest steel-producing country. The next largest, India, produced approximately 118m tonnes that year.

According to a September 2022 report from the Institute for Energy Economics and Financial Analysis, the MENA region is uniquely poised to lead global steel decarbonisation due to its use of lower-emissions smelting processes and planned developments in green hydrogen production – an attractive energy source for green steel.

Poised for the transition

Steel is composed of 98% iron, which is traditionally smelted in furnaces heated with coal at 1400°C to remove impurities. This process is responsible for some 90% of the greenhouse gases created by steel production, according to a September 2022 report from climate alliance Mission Possible Partnership.

The international steel industry will require $47bn in annual investment over the next 30 years to meet demand growth, with an additional $8bn-11bn of investment needed to transition to net-zero processes.

In the MENA region, however, steel is dominated by direct reduced iron (DRI) production, which uses natural gas-powered electric arc furnaces and thus has a smaller carbon footprint than traditional smelting furnaces.

Despite accounting for 3% of the world’s crude steel in 2021, the region generated approximately 46% of global DRI production. Thanks to a steady supply of natural gas and DR-grade iron pellets, as well as the presence of some of the world’s largest ore-pelletising facilities, MENA is primed to further increase the manufacture of low-emissions steel.

Expanding capacity

The global steel industry generates more than $870bn in revenue each year, creating significant opportunities for economies willing to invest in green energy technologies.

With hydrogen central to the region’s energy transition, many countries are looking to utilise this energy source to power their green steel industries.

At the end of January Prince Abdulaziz bin Salman Al Saud, Saudi Arabia’s minister of energy, announced plans to invest $266bn by 2030 to support the Kingdom’s clean energy targets. Some of this investment could go toward green hydrogen to power heavy industries such as steel production.

As of 2021 Saudi Arabia was the world’s 21st-largest steel producing country, manufacturing some 8.7m tonnes.

Green energy developments in the UAE are partly targeted to meet the emissions requirements of the European Green Deal, a roadmap approved in 2020 to decarbonise the EU’s economy. Furthermore, European markets could turn to UAE steel when a ban on Russian steel, implemented in response to its invasion of Ukraine, takes effect in September of this year.

Emirates Steel Arkan, in particular, has begun incorporating green hydrogen into its manufacturing processes. The company has already achieved a lower carbon footprint than competitors in China and India due to the use of natural gas to power electric arc furnaces, which boast a carbon intensity 75% lower than traditional coal-powered blast furnaces.

Additionally, Oman steel company Jindal Shadeed Iron and Steel is investing $3bn in a green steel plant located in the Duqm Special Economic Zone. Powered by green hydrogen, the plant is expected to produce 5m tonnes of steel annually upon completion in 2026.

The company is targeting exports to the automotive, consumer durables and wind power segments in the EU, Japan and other GCC countries.

In October of last year Brazil’s Vale, a metal and mining company, signed three memoranda of understanding with entities in the GCC for feasibility studies to establish industrial complexes capable of producing green steel. The complexes will be located in Ras Al Khair Industrial City in Saudi Arabia, Khalifa Economic Zone Abu Dhabi in the UAE and Duqm Special Economic Zone in Oman.

New technologies

Elsewhere, recent innovations are promising to expand green steel production while limiting both waste and emissions, which could be applied in MENA.

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In 2021 Sweden’s steel company SSAB partnered with utility Vattenfall and miner LKAB to produce the world’s first fossil-fuel-free steel, substituting green hydrogen for coal. The companies invested some $232m on a trial run through to 2024, with plans to open an industrial-scale facility in 2026.

As of October of last year Colorado-based start-up Electra raised $85m in funding to purify iron at temperatures as low as 60°C, eliminating the need for high-temperature coal furnaces and thus reducing the amount of emissions produced.

Last month US start-up Boston Metal announced that it raised $120m in a Series C funding round. The company uses electrical currents to heat ore to 1600°C to drive the chemical reactions that produce steel without using fossil fuels. The start-up previously received investment from Breakthrough Energy Ventures, the venture capital firm founded by Bill Gates, and Australian mining giant BHP.

By Oxford Business Group

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