Supply deficit of high-grade iron ore in global market may widen to around 70 mnt by 2030 - Vale

*DR agglomerates demand to rise to 110 mnt in 2030

*Seaborne demand for Fe62% iron ore, lower grades to decline

*New briquette product launched by Vale to drive low-CO2 transition

Morning Brief: The global decarbonisation wave sweeping the steel industry is set to radically alter the seaborne iron ore market. Raw material availability and cost considerations will be the prime determinants in shaping the efforts of steel mills worldwide to transition to low-emission production processes.

However, a supply-demand gap of around 70 million tonnes (mnt) is expected to emerge in the global market for premium grade iron ore products needed to drive decarbonisation, a senior executive with global mining major Vale informed BigMint.

Vale expects steel production worldwide to reach approximately 2.09 billion tonnes (bnt) by 2030 from a little under 1.9 bnt currently. While Chinese steel production is expected to touch around 970 mnt, Southeast Asian countries including India and the Middle Eastern and African nations are likely to witness combined steel production of approximately 410 mnt. On the other hand, steel production in Europe, the US, Japan, South Korea and other countries may reach around 710 mnt.

Vale's iron ore production stood at over 320 mnt in 2023 and guidance for 2024 is 310-320 mnt.

It deserves mention that over 70 countries are committed to net-zero targets. The steel industry accounts for around 8% of global emissions and investments of approximately $1 trillion are needed to decarbonise the industry.

Steps towards low-CO2 transition

Vale expects steel industry's decarbonisation to follow certain steps and stages as given below:

*By increasing operational efficiency emissions reduction of up to 15% is possible. Efficiency enhancement will basically involve burden mix optimisation with high-quality ore, energy optimisation and increased scrap usage.

*New technologies, excluding green hydrogen (H2), such as low-carbon fuels and enhanced O2 in the blast furnace and also carbon capture and storage (CCS) have the potential to drive emissions down by 15-60%

*100% green H2 used in direct reduction of iron ore has the potential of achieving near-zero emissions or deep decarbonisation.

Higher demand for premium ore

Vale predicts that the global iron ore market will get segmented into three main categories with higher demand for premium products. Seaborne demand of Fe62% iron ore fines used in the BF and lower-grades will decline from approximately 900 mnt in 2022 to around 570 mnt in 2030.

However, demand for premium DR-agglomerates will rise phenomenally from around 40 mnt in 2022 to 110 mnt in 2030. Demand for premium fines, BF agglomerates and lump ore is projected to increase from 600 mnt in 2022 to around 860 mnt in 2030.

Importantly, increasing demand may create a DR agglomerates' supply-demand gap of approximately 70 mnt in 2030.

Vale's new product

Vale has successfully tested a new type of iron ore briquette, adapted for the direct reduction route, which will contribute to the decarbonisation of steel production. The new type of briquette emits about 80% less CO2 compared to pellets in its manufacture, abating the company's direct and indirect emissions (scopes 1 and 2), according to the company. The briquette can also be used as a charge for the blast furnace.

So far in several tests carried out by the mining major among its clients in the Americas, Vale has been successful in establishing that the new briquette has a higher metallization rate compared with pellets and has high mechanical strength and resistance to disintegration during the direct reduction process thereby directly contributing to energy efficiency.

The briquette can substitute any direct load (sinter, granulates and pellets) in the furnaces. Direct reduction agglomerates (briquettes and pellets) require iron ore with a higher content, approximately 67%, besides low rates of contaminants such as silica and alumina. Vale is working to increase its production of high-quality iron ore and expand its capacity to concentrate ore, which also raises the iron ore grade.

The company has signed MoUs with over 30 customers to create 'mega hubs' in the Middle East (Saudi Arabia, UAE, and Oman) to produce hot-briquetted iron (HBI) to supply both local and seaborne markets, with a significant reduction in CO2 emissions. At the hubs, Vale is expected to build and operate iron ore concentration and briquetting plants, supplying the feed for the HBI plants.