ARENA announces funding for lower-emissions steel pilot in Australia

The Australian Renewable Energy Agency (ARENA) has allocated AUS$19.8 million (US$12.9 million) in funding to the NeoSmelt steel pilot project at Kwinana, Western Australia.

NeoSmelt, the largest ironmaking electric smelting furnace pilot plant in Australia, according to ARENA, is exploring the use of Direct Reduced Iron – Electric Smelting Furnace (DRI-ESF) technology in lower-emissions steelmaking.

The pilot project aims to demonstrate that it is possible to produce lower-carbon-emission molten iron from Pilbara iron ore.

ARENA's funding will be used for the front-end engineering design (FEED) study, which will inform a final investment decision for the pilot plant to be built. A final investment decision is expected in 2026.

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If approved, operations at the NeoSmelt pilot plant, which is expected to produce 30,000 to 40,000 tonnes of molten iron a year, are planned to begin in 2028.

The pilot plant would initially use natural gas to reduce iron ore to DRI. Once operational, the project aims to use lower-carbon emissions hydrogen to reduce iron ore and further reduce emissions.

ARENA CEO Darren Miller commented in a statement: "Globally, the steelmaking industry makes up around eight per cent of global greenhouse gas emissions, so the decarbonisation opportunity is huge.

“As the world’s largest producer of iron ore, Australia has an important role to play in reducing emissions across the steel value chain. We’re excited by the insights this project expects to provide. This is a positive step towards building a lower-emissions steel industry here in Australia.”

The steel pilot project is being delivered via a joint venture including BlueScope, BHP, Rio Tinto, Woodside and Mitsui Iron Ore Development

According to BHP, the electric smelting furnace (ESF) is capable of producing iron suitable for the basic oxygen furnace steelmaking process. The process involves iron ore first being converted to direct reduced iron (DRI) before being charged into the ESF.

By replacing the traditional blast furnace with the DRI-ESF equipment, estimates show reductions of up to 80% in CO2 emission intensity are potentially achievable, compared with the current industry average for the conventional blast furnace steel route.

Federal Resources Minister and member for Brand, Madeleine King added: “The fuels, metals, fertiliser, chemicals and grain shipped from Kwinana have powered Western Australia and the region since the 1950s.

“Now Kwinana is playing a central role in the world’s energy transition and a big part in global efforts to decarbonise. If we can decarbonise steel making, we will create far fewer emissions when building the cities of the world.”

The ARENA funding adds to the AUS$75 million (US&49 million) contribution from the Western Australian Government announced last year.