<article><p class="lead">Swedish iron ore mining company LKAB's new strategy, to switch from iron ore pellets to CO2-free direct reduced iron (DRI) by 2045, will make it the first source of green iron in a European steel industry which will come under ever-stricter environmental regulations in the next few decades.</p><p>The European Commission's pledge to <a href="https://direct.argusmedia.com/newsandanalysis/article/2032383">decarbonise its economy by 2050</a> will require fundamental changes in the steel industry, and LKAB's head start in producing the first green iron ore will be an advantage if the commission makes the target legally binding as it intends to.</p><p>Costs <a href="https://direct.argusmedia.com/newsandanalysis/article/2157051">may undermine</a> the likelihood of significant production of green steel via the DRI route in the coming decade, according to global steelmaker ArcelorMittal, which is working to market 600,000t of green steel annually by 2022. ArcelorMittal expects its smart carbon tactic, based on capturing and reusing carbon emitted by the blast furnace-based production process and which will also use hydrogen gas injection, to deliver results sooner. But in the long term, LKAB's green DRI strategy has some significant advantages, in terms of demand-supply fundamentals. Consultancy firm Wood Mackenzie estimates that global green hydrogen costs will <a href="https://direct.argusmedia.com/newsandanalysis/article/2135810">fall by 40pc</a> by 2040, and that the costs of producing green hydrogen in Germany will be similar to those of hydrogen produced from fossil fuels by 2030.</p><p>LKAB is confident of securing competitively priced hydrogen produced from hydropower in the long term, and Norrbotten — Sweden's northernmost county, where the company's mines are situated — has an abundance water energy. Vattenfall, the energy firm co-operating with LKAB on the HYBRIT initiative for fossil-free steel, has 15 hydropower plants in Norrbotten alone. The HYBRIT initiative will also establish an outlet for LKAB's DRI to Swedish steelmaker SSAB. "In general, our new strategy has been received very well among our customers, and we intend to make the transition in consensus with them," the company said.</p><p>LKAB's transition away from pellets is prompted by the company's estimate that its mineral reserves will run out by 2030 unless it digs to a deeper level. The higher production costs associated with deeper mining mean that LKAB will have to market higher-value products, the company said. "It will require a lot of work and money to develop the automated, autonomous technology to mine at this deeper level. The fact that we are now looking beyond 2050 means that our mining as well as our ore reduction will need to be carbon free," the company said. "Our new strategy is based on the fact that a mining company always needs to plan far ahead."</p><p class="bylines"><i>By Brendan Kjellberg-Motton</i></p></article>
