Sweden’s LKAB plans to pump $47bn into carbon-free iron ore in a push it says is the country’s largest-ever industrial investment and will require electricity equivalent to a third of current national supply.
The state-owned company said on Monday it would invest up to SKr400bn over the next 20 years to use “direct reduced iron” (DRI) produced using emissions-free hydrogen, raising the prospect of a steel industry untethered from fossil fuels.
Goran Persson, the former Swedish prime minister who is LKAB chairman, described it as “a risk, yes” but also an opportunity to secure the future of mining in the Swedish Arctic.
The steel industry is responsible for up to 9 per cent of global emissions, with huge amounts of carbon dioxide produced when coke is burnt in the furnaces where most of the world’s iron is extracted from its ore.
Jan Mostrom, LKAB chief executive, said that the move meant the group — Europe’s largest iron ore miner — would “go from being part of the problem to being an important part of the solution”.
LKAB has already taken the extraordinary step of physically moving the Arctic town of Kiruna and its buildings several kilometres to carry on mining.
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At the heart of its new plan to have net-zero carbon emissions by 2045 is a switch to hydrogen-based DRI, also known as “sponge iron”, which would go into electric arc furnaces rather than coke-fuelled blast furnaces. LKAB believes this could lead to its revenues more than doubling over the same period.
Mr Mostrom added that the resulting reduction in greenhouse gases at its steelmaker customers would be equivalent to two-thirds of all Sweden’s emissions and three times greater an effect than abandoning all cars in the country permanently. But he conceded the transformation would go only as fast as its clients wanted, with the potential of a rising carbon price a further inducement to move into emissions-free steel.
European steelmakers such as Sweden’s SSAB and ArcelorMittal are looking at ways of using hydrogen — potentially derived from renewable energy such as the hydroelectric power that is abundant in Scandinavia — to reduce emissions, including using an alternative to blast furnaces.
But green hydrogen requires large amounts of energy. LKAB estimated the energy required in its transformation would be equivalent to about one-third of Sweden’s current 160TWh of annual production.
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“This is the biggest transformation in the company’s 130-year history and could end up being the largest industrial investment ever made in Sweden. It creates unique opportunities to reduce the world’s carbon emissions and for Swedish industry to take the lead in a necessary global transformation,” said Mr Mostrom.
He added that there were still big risks, especially relating to the complex regulatory approvals needed. Two Swedish ministers took part in LKAB’s presentation to journalists on Monday, underscoring the company’s importance to the country.
Hydrogen-based steelmaking using DRI and EAFs is widely seen as the only plausible path to carbon-free steelmaking at scale.
However, some analysts and companies such as BHP, the world’s biggest mining company, think blast furnaces will still account for about 50 per cent of steelmaking by 2050.
That is because of difficulties accessing cheap renewable energy and the fact that steel producers in India and China have a relatively young fleet of blast furnaces that could run for another 30-40 years before they need replacing. A lack of high-quality iron ore, which is needed to make DRI, is another concern.
Additional reporting by Neil Hume
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