Fortescue and Baowu join forces to decarbonize the steel industry

Australia’s Fortescue, the world’s fourth-largest iron ore supplier, and Baowu Resources, a subsidiary of the world’s largest steelmaker China Baowu Steel Group, have signed a memorandum of understanding decarbonizing the global steel industry. It is reported by Reuters.

“We are committed to creating a green iron supply chain. The partnership with China Baowu will help accelerate the development of green technologies and meet the growing demand for these products both in China and abroad,” said Shelley Robertson, Chief Operating Officer of Fortescue.

Fortescue is already working on a green iron project at its facilities in Christmastown, Western Australia. The facility is expected to produce more than 1.5 thousand tons of green iron per year, with first production scheduled for 2025. The company has an ambitious goal to make all its iron ore products environmentally friendly by 2030.

The green iron production technology involves the use of pure hydrogen in reduction furnaces to convert iron ore into sponge iron (HBI), which is subsequently melted in electric arc furnaces to produce a high-purity product.

According to analysts, Australia, the world’s largest exporter of iron ore, could lose up to half of its revenues in this sector if it does not increase production of green iron. Competition from countries that are switching to renewable energy steel production is growing.

“Australia risks losing its dominant position in the global iron ore market if it does not accelerate the production of green iron. This partnership with China Baowu will be an important step in achieving this goal and ensuring stability in the steel industry on the path to environmental transformation,” said Dino Otranto, CEO of Fortescue, in October 2024.

As GMK Center reported earlier, Fortescue shipped 191.6 million tons of ore in the 2023/2024 financial year (ended June 2024). These volumes are in line with the previous fiscal year and below the estimated range of 192 to 197 million tons. Total ore production in FY2023/2024 amounted to 216.9 million tons, down 1% y/y.

Fortescue plans to increase spending on its energy division to advance several new green hydrogen projects.

In addition, experts noted an increase in decarbonization costs to $700-900 million for the 2024/2025 fiscal year from $300-500 million in the previous fiscal year. The company aims to achieve its carbon neutrality goals by 2030.