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Go Green with GBO: Why is MENA investing in ‘Green Steel’?

MENA could benefit from other recent advances that promise to increase the production of green steel while reducing emissions and waste

Many MENA (Middle East and North Africa) nations are investing in green steel manufacturing to gain market share and assist in meeting emissions objectives as the global industrial sector works to reduce its carbon footprint.

Even though industry produces 20% of the world’s greenhouse gas emissions, it has been sluggish to implement carbon-efficient production techniques. Because steel is mostly made of coal to fuel smelting furnaces, it is the manufacturing sector with the highest emissions, contributing 7% of annual global emissions.

China, which is by far the greatest steel-producing nation in the world, produced over half of the roughly 2 billion tons of steel produced worldwide in 2021. India, the next-largest producer, put out about 118 million tonnes in that year.

The MENA region is uniquely positioned to lead global steel decarbonisation because it uses lower-emissions smelting processes and has planned developments in green hydrogen production, an appealing energy source for green steel, according to a September 2022 report from the Institute for Energy Economics and Financial Analysis.

Iron, which makes up 98% of steel, is often smelted in furnaces with coal heated to 1400°C to remove impurities. Some 90% of the greenhouse gases produced by the steel industry are attributed to this process, according to September 2022 research published by the climate alliance Mission Possible Partnership.

Over the next 30 years, the global steel industry will need to invest USD 47 billion annually to fulfil the growth in demand. An additional USD 8 to 11 billion would be needed to make the switch to net-zero processes.

However, the manufacture of direct reduction iron (DRI), which employs electric arc furnaces driven by natural gas and has a lower carbon footprint than conventional smelting furnaces, is the predominant method of producing steel in the MENA region.

In 2021, the region produced over 46% of the world’s DRI, although it produced only 3% of the world’s crude steel. Owing to a consistent flow of DR-grade iron pellets and natural gas, along with the presence of some of the biggest ore-pelletising plants globally, the MENA region is well-positioned to augment the production of low-emission steel.

With an annual turnover of over USD 870 billion, the global steel sector has substantial prospects for economies prepared to invest in renewable energy technology.

Many nations are looking to use hydrogen as a fuel source to power their green steel factories, since hydrogen is essential to the region’s energy transformation.

Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman Al Saud, declared in January 2023 that the country would invest USD 266 billion by 2030 to help meet its sustainable energy goals. A portion of this investment might be used to power heavy sectors like steel production with green hydrogen.

With 8.7 million tonnes produced, Saudi Arabia ranked as the 21st-largest steel-producing nation in the world as of 2021.

The European Green Deal, a plan agreed in 2020 to decarbonise the EU economy, has emissions standards that the UAE’s green energy plans are partially intended to achieve. Furthermore, after a ban on Russian steel in reaction to its invasion of Ukraine, European markets may look to UAE steel.

Specifically, Emirates Steel Arkan has started integrating green hydrogen into its production procedures. Because the company uses natural gas to power its electric arc furnaces, which have a carbon intensity that is 75% lower than traditional coal-powered blast furnaces, it has already managed to achieve a lower carbon footprint than its competitors in China and India.

Furthermore, the Duqm Special Economic Zone will see a USD 3 billion investment from the Oman-based steel manufacturer Jindal Shadeed Iron and Steel in a green steel factory. When the factory is completed in 2026, it will be fuelled by green hydrogen and can produce 5 million tons of steel yearly.

The company wants to export to the European Union, Japan, and other Gulf nations in the automotive, consumer durables, and wind power sectors.

The Brazilian mining and metals company Vale signed three memoranda of understanding with GCC organisations in October of last year to investigate the viability of establishing industrial complexes that might produce green steel. The complexes will be situated in the Duqm Special Economic Zone in Oman, the Khalifa Economic Zone in Abu Dhabi, and Ras Al Khair Industrial City in Saudi Arabia.

MENA could benefit from other recent advances that promise to increase the production of green steel while reducing emissions and waste.

Sweden’s SSAB steel firm, in collaboration with miner LKAB and utility Vattenfall, produced the world’s first fossil fuel-free steel in 2021 by using green hydrogen instead of coal. With intentions to open an industrial-scale facility in 2026, the firms invested about USD 232 million in a trial run that would last until 2024.

To purify iron at temperatures as low as 60°C and do away with the necessity for high-temperature coal furnaces, Colorado-based start-up Electra raised USD 85 million in funding as of 2023 October. This reduced the number of emissions produced.

United States-based start-up Boston Metal revealed in November 2023 that it had completed a USD 120 million Series C fundraising round.

Without utilising fossil fuels, the business heats ore to 1600°C using electrical currents to initiate the chemical reactions that generate steel. The Australian mining behemoth BHP and Bill Gates’ venture capital fund Breakthrough Energy Ventures had already invested in the start-up.

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