Ground Breakers: Baowu plays the field in search for green steel partner

China’s Baowu signs MoU with Fortescue to chase green steel dreams
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China’s largest steelmaker Baowu has been running all over town (well, the iron ore city of Perth to be exact) looking to get hitched in its hopes of unlocking the secrets of green steel.

The problem is thus. We need steel for just about any kind of industrial growth, including renewables, wind turbines, solar panels, electric vehicles and the like.

But steel is, largely, produced with iron ore and coal in a blast furnace. That generates more CO2 than it does actual steel, producing 8% of the world’s emissions.

A lot of those are, ultimately, the responsibility of Baowu and the Australian mining giants who count as their largest suppliers companies like Rio Tinto (ASX:RIO) and Fortescue Metals Group (ASX:FMG).

Rio Tinto has already revealed its plans this week to link with Baowu in a variety of initiatives to use its low and mid-grade fine and lumps — not suited to known low-carbon steelmaking processes — in the green steel field.

Check that out in Bulk Buys below.

READ: Bulk Buys: Why has coal retreated so fast from last year’s record highs?

Now it’s FMG’s turn, with the Andrew Forrest backed iron ore miner and green energy hopeful announcing an MoU to work together with Baowu on reducing emissions associated with iron and steel making.

“This MoU further strengthens our longstanding partnership with China Baowu, the world’s biggest steel maker and Fortescue’s largest customer, and reflects our collective commitment to eliminate emissions,” Fortescue Metals chief executive Fiona Hick said.

“Fortescue is exploring a range of options to reduce emissions in the steel value chain including through partnerships with suppliers, customers and research institutes.

“We firmly believe that collaboration and partnerships such as this will be integral to developing the technologies required to deliver on our ambitious target of net zero Scope 3 emissions by 2040.”

It’s not easy being green iron

FFI has already been having quiet success with a pilot scale process in a Perth lab using a sort of electrolyser to reduce iron ore to green iron without hydrogen or coal.

Only on a very small scale mind you.

China Baowu chairman Derong Chen said the $65 billion mining giant’s dual strategy of pursuing iron ore and green energy was aligned with the State-owned steelmaker’s development goals.

“Collaboration with iron ore suppliers and enhancing the strategic planning of iron ore are key to Baowu’s strategy. The green and low carbon transition provides Baowu with significant challenges and development opportunities,” Chen said.

“Fortescue’s strategy of transitioning into a green energy and resources company is aligned with Baowu’s future development plan. We look forward to conducting more substantive collaborations together on iron ore, green energy and resource development.”

How serious Chinese companies are about this is always a matter of debate.

Without doubt one of the best things for investment in green steel technology will be robust iron ore and steel prices that gives miners and mill owners plenty of free cash to throw at the problem.

Recently the outlook has looked a little cloudy, with the Chinese property boom that historically powered iron ore petering out to what Goldman Sachs is now calling an “L-shaped” recovery.

However, iron ore returned to the green yesterday as China cut rates and Beijing prepared stimulus measures to revive its ailing property sector, lifting 2.3% to US$111.40/t.

Copper too looked tasty, up 1.8% to US$8460/t, with nickel (+5.8% to US$21,952/t) and zinc (+1.4% to US$2381.50/t) following suit.

That sent local mining stocks flying.

BHP (ASX:BHP) surged 2.98% this morning, with FMG up 3.85% and Rio up 2.95%.

All of the major battery metals stocks sans Lynas (ASX:LYC) rose in excess of 3%, with only gold and uranium letting down the team.

Liontown (ASX:LTR) and Allkem (ASX:AKE) are not far off all time highs, with heat well and truly coming back into the lithium sector.