Green Iron Corridors: A New Way to Transform the Steel Business
By rethinking the ironmaking process around the world, we can bring clean steel one step closer.
If we are to halt runaway climate pollution while meeting global demand, the way we make steel needs to change. Currently, steel contributes 11 percent of global CO2 emissions, and demand for the product is expected to increase by one-third between now and 2050.
Clean steel will only be possible with a rapid shift to low-emission production technologies — such as green hydrogen-based methods. For alignment with the International Energy Agency’s (IEA) 1.5°C scenario, an estimated 35 percent of ore-based steelmaking must be produced through hydrogen methods (specifically hydrogen-based direct reduction or H2-DRI) in 2050.
To decarbonize steel effectively, we need to look at all the processes that go into its production. Ironmaking — the most carbon-intensive step in the steelmaking process — is critical to this goal.
RMI and the Green Hydrogen Catapult (GHC), a coalition of ambitious green hydrogen market leaders, have embraced the challenge of decarbonizing the steel value chain and are actively working towards this goal.
Introducing Green Iron Corridors
To understand how we get there, we have to understand where we’re coming from. Traditionally, steelmaking all happened under one roof, where large integrated facilities supported both iron and steelmaking and where coal was used as the primary fuel and reductant. Because of this, cheap coal resources drove the geographic patterns of iron and steelmaking in the last century, with an advantage accruing over time to those who moved fastest to integrate into highly optimized facilities with economies of scale.
But with the advent of greener methods whose cost competitiveness is driven by renewable energy availability and scalability, ironmaking will be drawn to new geographies rich in iron ore and renewable resources (demonstrated by new H2-DRI projects underway in Sweden where there is a combination of high-quality ore and cost-competitive wind and hydropower energy). It could prove cost-effective, and win-win, to split these processes up: with ironmaking taking place in one location with abundant ore and renewable energy potential and steelmaking happening somewhere else with steelmaking capabilities — and demand — already in place. This process splitting could open new markets for regions with abundant ore but little steelmaking capability and accelerate the global transition to low emissions iron and steel production, satisfying climate-conscious buyers who are serious about green steel. We call these potential export-import routes green iron corridors.
Location, location, location
The business case for green iron corridors becomes clearer when strategically choosing export and import locations based on resources and needs. A sizeable portion of the cost to produce green steel is driven by the cost of renewable hydrogen, approximately 15–40 percent of the cost of steel. So, locations with cost-competitive hydrogen production and iron ore will have a competitive advantage. Depending on route-specific tradeoffs between quality of renewable resources, cost and distance of seaborne transport, and cost and efficiency of shipping a more finished product of iron rather than iron ore, the iron reduction could either occur at the mining location or at a secondary location where renewable energy —and thus reduction— is particularly competitive before final shipment to steelmaking centers. Current subsidies will unlock cost reductions for hydrogen-based iron production in developed countries today, but ultimately the supply chain will be optimized around competitive renewable energy resources.
Another key determining factor on the export side will be the iron ore resource — not all ore is created equal. Typically, DRI with Electric Arc Furnace (EAF) operations prefer iron ore pellets with an iron content of at least 67 percent and lower concentrations of key impurities such as silica, phosphorous, and alumina. To meet this requirement, ores are often beneficiated at the mine to separate the iron oxides from the impurities, producing a concentrate that is then pelletized. This process is already routinely done globally, favoring locations with high-grade ore such as Canada and Brazil, but also with low-grade ore, such as the 20–35 percent iron ore mined and upgraded in the United States.
Alternatively, for the ores that are difficult to upgrade to DRI-EAF grade quality due to specific composition, there is work underway to utilize additional downstream processing technology (e.g., Electric Smelting Furnace, ESF) which are already proven in other industries (e.g., ferroalloy production) to remove the impurities. This downstream processing could provide a second life and alternative pathway for Basic Oxygen Furnace use alongside DRIs. Our cost analysis indicates either option as economically feasible, with the preference driven by existing infrastructure and ore specifics such as starting grade, iron-bearing mineral type (magnetite vs. hematite), and specific impurity composition. Among major iron ore miners, investments are being made for both options, with Vale, Rio Tinto, and Fortescue increasing DR-grade pellet production via upstream beneficiation and Rio Tinto and BHP investing in downstream ESF pilot facilities.
Given these various drivers, an understanding of today’s most competitive iron ore reduction locations requires a combined view of subsidies, iron ore quality and management, shipping distances, and renewable resources. RMI, with support from technical advisors and GHC members, has developed technoeconomic modeling to identify these cost-competitive regions and evaluate corridor tradeoffs between these factors. The modeling confirms lowest-cost export options with high-grade iron ore co-located with favorable renewable energy resources and enabling policies can produce iron at $390 per ton — comparable to recent global prices.
Shown in Exhibits 1 and 2, these export locations include the United States (due to IRA subsidies and tax credits), South Africa, Canada (with tax credits), Mauritania, Australia, Brazil, and Chile. Pairing these export regions to importers with strong steelmaking capacity, reliance on iron ore imports, and demand for green hydrogen to meet energy security and decarbonization targets enables a clear business case for top importer regions of Europe, Japan, and South Korea to develop a blueprint for green iron corridors.
Green iron corridors can offer efficiency, cost, and growth opportunities across the steel value chain. As countries are establishing hydrogen strategies, regions such as Northern Africa and Australia are emerging as promising green hydrogen exporters while others will rely on imports to supplement their domestic production capabilities, such as the EU’s Hydrogen Strategy target of importing 10 million tons of green hydrogen by 2030. When these export and import regions overlap with existing iron ore trade flows, transporting finished green iron sees both cost and energy savings compared to transporting hydrogen and ore separately. Few infrastructure changes will be needed on the shipping side for this transition, as briquetted green iron, also known as Hot Briquetted Iron (HBI), can be handled and shipped via similar processes as existing iron ore and act as a vector for hydrogen trade.
Lower costs, faster transition
The main benefit of a green iron corridors approach for importers is to lower costs and enable a faster transition for their steel sector. Crucially, it can help to avoid some of the domestic H2-DRI production infrastructure spending that is required for 1.5°C alignment, while still seeing cost and efficiency savings. At least $5.5 billion has been allocated to 10 commercial-scale hydrogen-ready DRI facilities by government funds in Europe, but even with these generous subsidies companies are struggling to reach final investment decisions, citing high costs for domestic hydrogen as a financial barrier. Instead, companies are already considering green iron imports into Europe from regions with lower hydrogen costs as a way to lower their emissions in a cost-efficient manner while still keeping steel production in Europe (to put the $5.5 billion government investments in perspective, it is estimated that it would require $105 billion in capital investments for new steel facilities and at least $330 billion for the associated hydrogen and electricity production capacity totaling $435 billion to transition the entire European integrated steel industry to hydrogen-based steelmaking).
Building out the infrastructure to provide the roughly 5 million tons of renewable hydrogen production to transition the integration steel production would require 250–350 TWh per year of electricity — a 10% increase from current generation in Europe — supplied by 150–350 GW of new renewables and using 4.5-10 million acres of a land-constrained region. Instead, some of this infrastructure spending and buildout can be avoided while also saving between 5–40 percent on the cost of clean steel by importing green iron rather than producing domestically (shown in Exhibit 3 with Germany as an example importer). These cost savings can be achieved while still maintaining domestic steelmaking activities, which make up approximately 75 percent of the iron and steel direct jobs.
In Europe, the combination of committed buyers demanding green steel who are willing to pay 20-30% premiums for green products and implementation of carbon taxes makes a strong business case for establishing these trade corridors sooner rather than later. As EU Emissions Trading Scheme (ETS) free allowances phase out and the Carbon Border Adjustment Mechanism (CBAM) phases in by 2034, cost savings compared to fossil-based steel either produced in (55% of consumption) or imported into Europe (34% of consumption) can also be realized. For example, steel made in Germany from the lowest cost green iron imports compared to domestic fossil-based steel with projected ETS carbon taxes will be a roughly similar cost in 2028 and significantly cheaper by 2030 (up to 20 percent cost savings). Although cost is important, it is not everything: other factors such as available skilled workforce, geopolitical risk, water and land availability, government support, energy security and equity, hydrogen readiness and enabling policy, and stakeholder engagement will also play a role in selecting key export and import locations.
The idea of green iron trade is gaining momentum, with interest from steel incumbents and on-ground development from new companies. Yet, advancement from concepts and MOUs to construction and production remains to be seen. To accelerate green iron supply chains, RMI and the Green Hydrogen Catapult will unite extensive sector experience, analytical capabilities, and system-level assessments to promote the advantage of corridor networks. Combining our research with supply chain convenings, we aim to kick-start the launch of first-of-a-kind green iron corridors with private and public partnerships. Action is needed across the value chain to make this a reality: governments must show intent, steelmakers in importing regions must show appetite, and iron producers and iron ore miners in exporting regions must begin laying the investment foundations. We can decarbonize steel production efficiently and cost-effectively with green iron corridors: now is the time to accelerate the transition.
To learn more or get involved please contact Chathu Gamage or Sascha Flesch at cgamage@rmi.org and sflesch@rmi.org
About the Green Hydrogen Catapult:
The Green Hydrogen Catapult aims to expedite the global adoption of green hydrogen by increasing production capacity 50-fold, deploying 80 GW of renewables-powered electrolyzers, and cutting costs by 50% to less than $2 per kg of green H2. This coalition, supported by the UN High-Level Climate Champions and RMI, brings together leaders in the green hydrogen market to address the challenge of decarbonizing hard-to-electrify sectors. It encourages collaboration across the green hydrogen value chain, inviting new members to join its mission to scale a green hydrogen economy. For more information please visit: https://greenh2catapult.com