BlueScope CEO says Forrest’s green steel vision ‘is not going to be reality’, think green iron first
BlueScope chief Mark Vassella doesn’t think mining billionaire Andrew Forrest’s vision for a green steel industry in the Pilbara is going to be a reality.
BlueScope managing director and chief executive Mark Vassella says there is an “incredible incentive” for Australia’s three major iron ore miners to work out a solution to decarbonise the steelmaking process.
While technology, energy, policy and cost challenges remain in the foreseeable future, Australia could benefit from increased collaboration towards long-term changes, Mr Vassella and his leadership team told investors at a briefing on Monday.
The briefing was the first of two this week on the group’s climate plan to cut carbon emissions to 12 per cent by 2030, compared to 2018 levels, and progress to net zero greenhouse gas emissions across all operations by 2050.
“It makes a whole lot of sense to me that a green iron product is produced in the Pilbara using their lower gas (prices) and ... their capacity for renewables just with the space and availability of land in the region and sun and wind to produce a green iron product, which can then be sold to steel makers globally,” Mr Vassella said.
“Some of the initial commentary from Andrew (Forrest), or the interpretation of the initial commentary from Andrew was about building a global steel industry in the Pilbara.
“I personally don’t think that’s going to be a reality.
“The history of the steel industry is littered with people trying to export steel on an ongoing basis and it doesn’t work that way.
“But I can see enormous sense in a green iron product being produced at the source of iron ore, at the source of renewable energy or lower cost energy, and that value-added product being sold to the steelmakers and customers that the iron ore companies have.”
Mr Forrest earlier this year outlined plans to make Fortescue a leader in green hydrogen and green steel.
Mr Vassella said the “most modern and significant” fleet of blast furnaces were currently operating in China.
“70 per cent of steel produced out of blast furnaces is a massive incentive for us to solve the technology problem.
“Think about the incentive that those three massive iron ore miners have to come up with the solution for their customers who are blast furnace operators like ourselves to help decarbonise the process.
“There’s an incredible incentive for Fortescue and Rio and BHP to work out a solution for the hematite ores that they have.”
BlueScope’s climate change chief executive Gretta Stephens said talks were ongoing with ore suppliers.
“Obviously our Scope 1 issues become Scope 3 issues for our suppliers and so we’re mutually incentivised,” Ms Stephens said.
“We’re not a massive steel maker by world standards, but we’re Australian-based, we’re used to doing technology development.
“We’re really a good location for piloting and trial and testing opportunities. There’s a lot that we can work on together.
“It’s fair to say steel makers can’t solve green steel alone because it needs enormous renewable energy and an entire hydrogen industry to be built out and that’s not going to be BlueScope alone doing that.”
Mr Vassella said it would “be an issue” in any jurisdiction that BlueScope operates in, whether it is the US, NZ or Australia, if it got frozen out because of energy costs or policy decisions.
“(But) I’m eternally optimistic about this,” he said.
“We engage regularly with industry ministers, energy ministers, treasurers around the public policy settings that we think are necessary and have argued long and hard around reliable, renewable and affordable energy, and the policies that we need to allow us to transition from our fleet of fossil fuel-based energy systems to what we all hope and think is the future in terms of renewable energy.
“But for a business like ours that has a very high baseload (power) that needs that baseload available 24/7, we’re not yet in a position that renewable energy is the answer for us.
“It’s fair to say that the governments, both at a state and federal level, understand the challenges that we have as an industry and are supportive.”
Overall, BlueScope said it saw a long term future for steel due to industry and segment trends, including greater demand from the clean energy transmission infrastructure, construction and digital economy sectors.
“On the supply side, a step change in rationalisation and consolidation has occurred in the US steel industry and China’s efforts to reduce exports and limit overproduction are major
structural positives,” Mr Vassella said.
Earlier this month, BlueScope revealed high electricity and natural gas costs had cut off options to reduce carbon emissions at its Port Kembla steelworks.
BlueScope is preparing to replace its No. 5 blast furnace at Port Kembla when it comes to the end of its working life later this decade, potentially as early as 2026.
Blast furnaces are the source of the bulk of carbon emissions from steelmaking, as they involve mixing iron ore, coke – made from metallurgical coal – and other ingredients such as limestone to produce a molten iron, which is subsequently turned into steel.
A $10m pre-feasibility assessment is underway into relining its mothballed No. 6 blast furnace at a capital cost of up to $800m, which is expected to underpin strong earnings and cash flow generation.
The project is expected to provide significant flexibility to adopt new technologies when they are technically and commercially viable.
BlueScope has a five-year global climate investment program of $150m, which looks at optimising current assets, including raw material usage, energy projects and use, and emerging and breakthrough technology projects through industry and government partnerships.
Chief financial officer Tanya Archibald said “climate capital” was considered critical in maintaining long-term sustainability and would be “prioritised ahead of growth investments and shareholder returns. where appropriate”.
“Where the economics of climate-related investments are less compelling, we will look to options for external stakeholder funding,” Ms Archibald said.
“This recognises that supportive public policy will be required to drive investment in decarbonisation, and to avoid risk of carbon leakage.”
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