Sanjeev Gupta’s GFG Alliance targets WA in low-carbon iron, steel race
Sanjeev Gupta’s GFG Alliance is hunting for land and iron ore supplies in Western Australia amid a sudden acceleration of interest in low-carbon iron ore and steel production.
Sanjeev Gupta’s GFG Alliance is hunting for land and iron ore supplies in Western Australia amid a sudden acceleration of interest in low-carbon iron ore and steel production, joining BlueScope Steel and international giants such as POSCO in a rush to establish a foothold in the resource-rich state.
GFG has been scouting for industrial land around Geraldton suitable for a steel plant and – having missed out on previous state government land allocations – is believed to have approached Iluka Resources about sites close to the company’s Narngulu mineral separation plant.
BlueScope has also recently sent a team to WA as part of the company’s Project Ironflame initiative, a hunt for bridge technology between BlueScope’s coal-fired steelmaking at Port Kembla in NSW and future green steel initiatives.
In October, POSCO lodged environmental approval documents outlining its plans for a two-million-tonne-a-year hot briquetted iron (HBI) plant in the Boodarie industrial estate at Port Hedland, and earlier this year the chairman of China’s biggest steelmaker, Baowu, flagged the possibility of establishing a WA steel plant in talks with federal Trade Minister Don Farrell in China.
All are competing with local start-ups including Green Steel WA, and a venture capital-backed company associated with former Andrew Forrest lieutenant Michael Masterman – also believed to have recently made presentations to the state government recently.
Taken together, the sudden rush represents significant acceleration of interest in the emerging sector, particularly given major steelmakers have long played down the idea of any rapid transition away from the blast furnaces that dominate the industry.
WA industry sources say that interest in setting up new Australian steel plants has spiked in recent months, however. The fact that Sweden’s H2 Steel was able to tap equity markets for €1.5bn ($2.5bn) in September has also helped catalyse interest, but industry sources say the major factor is the realisation that production and transport of millions of tonnes of green hydrogen into seaborne markets is likely more than a decade away, despite the hopes of companies such as Fortescue Energy.
And, while WA’s abundant renewable energy has made the state the target of a plethora of would-be green hydrogen producers, it is the state’s vast natural gas reserves that have triggered the sudden interest in accessing industrial land and potential gas offtake in the west.
The process seen as the most viable replacement for traditional blast furnaces is known as direct reduced iron, in which natural gas is used to convert magnetite iron ore into iron pellets – estimated to reduce carbon emissions from steelmaking by 25 per cent.
In time, the natural gas used in the process could be replaced by green hydrogen to strip carbon emissions back to near nothing.
Only two years ago BlueScope told shareholders it did not see DRI has a commercially viable option in Australia, but the company, like its competitors, has now accelerated work on mezzanine carbon reduction steps such as DRI rather than wait for the promised delivery of cheap and abundant green hydrogen.
POSCO’s proposed Port Hedland HBI plant is the first major proposal of its type since BHP lost billions on its own HBI plant in the early 2000s. But POSCO’s environmental approval documents say that the steel giant is not initially considering the use of hydrogen in the plant as “required technology is yet to be developed on a cost-effective basis”.
“It will be considered for incorporation into the proposal in the future when it is developed and practicable (expected to be 5-10 years away),” the documents say.
In a September investor presentation BlueScope executives said the company was now looking to natural gas as a transition feed for its steelmaking operations in the long term, a move that could require the establishment of new production hubs outside the company’s Port Kembla operations, given gas prices on the east coast of Australia.
Port Kembla already uses about a petajoule of gas each year. Moving away from the use of coking coal in its blast furnaces to a feed of direct reduced iron using natural gas would increase its gas requirements to 40 petajoules a year – or about 7 per cent of current east coast gas demand.
The same process would consume about 220,000 tonnes of green hydrogen a year, the company said. This would need a sharp fall in electricity prices to below $30 a megawatt hour to be competitive. BlueScope has approved a $1bn relining of a blast furnace at its NSW steelworks, which will keep the operation running for decades to come. But executives told a community meeting in Port Kembla in June the company would need to consider South Australia and WA as potential locations for future steel plants due to the presence of magnetite iron ore deposits in both states, with WA believed to be firming as a favourite if cheap natural gas remains available.
Local start-up Green Steel WA is looking for partners and support for a $400m green steel recycling plant near Collie in WA that would produce $400,000 tonnes of steel a year using an electric arc furnace. It has also floated plans to build a DRI plant near Geraldton, initially using gas and magnetite iron ore.
Mr Gupta’s GFG has been among the most active in recent months. The company has hired former Labor state minister Alannah MacTiernan as a consultant to help it establish a foothold in WA, and the British metals magnate is believed to have recently toured potential sites for a plant. A spokeswoman for GFG confirmed its interest on Friday, saying its primary interest remained expanding its existing magnetite operations and the green steel transformation in Whyalla in South Australia. But she said the company was actively looking at future options in WA, saying GFG sees “significant potential in Western Australia and in particular the Mid West”. The acceleration of interest in WA steel plants could also help reinvigorate the WA magnetite iron ore industry, where new projects have struggled to find support in the face of the massive delays and cost blowouts at previous projects, most recently at Fortescue’s Iron Bridge.
Any switch to DRI and electric arc furnaces would need either Big supplies of scrap metal – which would need to be imported into WA – or the use of magnetite concentrate as a primary feed.
Magnetite is produced at three WA mines: CITIC’s Sino Iron project, Fortescue’s Iron Bridge and the Ansteel-controlled Karara operation in the Mid West. Iron ore produced at all three is currently destined for export, but industry sources say Karara has signalled its interest in expanding production to supply local steelmakers able to pay for its concentrate.
In addition the interest could spur the resurrection of previously moribund magnetite projects in the Mid West, sources say. The Australian understands the FI Joint Venture, which is hoping to build a five-million-tonne-a-year operation at its Yogi deposit 250km north east of Geralton, has been in active discussions with potential buyers.
The FIJV, owned by Hong Kong-based Mineral Investment Technology Group (MITG) is awaiting on final environmental approvals before work can kick off, and recently began applying for fresh mining licences across its tenement base, WA government records show.
But DRI is not the only technology under consideration. Fortescue Metals Group confirmed on Friday it was pushing ahead with research on its own green iron technology, aimed at using low-temperature electrolysis to create pure iron from iron ore.
