Mysteel Global: The world’s demand for direct reduce iron (DRI), a key material in global steel industry’s shift toward low-carbon development, is expected to grow steadily over the next 15 years as steelmakers are seeking ‘greener’ feeds, according to the analysis of Nippon Steel Technology (NSTEC), the research and engineering arm of the world’s leading steel producer Nippon Steel based in Japan.
“Essentially, the demand for reduced iron corresponds to the shortfall in steel scrap supply as electric-arc-furnace (EAF) steelmaking advances,” Tetsuro Kawai, an official from NSTEC’s Global Steel Information Department, told attendees at a webinar held by Mysteel in early March.
DRI: a key pathway for low carbon emission steelmaking
In EAF steelmaking, using natural gas-based DRI as 100% feed material results in carbon emissions of about 0.56 tonne CO2 per tonne of steel, similar to that of 100% steel scrap-based production and significantly lower than the 1.87 tonne CO2 in the coal-based blast furnace (BF) route, NSTEC’s research shows. More importantly, if DRI is produced with hydrogen, CO2 emissions can be further reduced to just 0.01-0.04 per tonne of steel.
This makes DRI a key substitute for steel scrap in the steel industry’s low-carbon transition, when uncertainties still exist in global scrap supply, according to Tetsuro.
Growing scrap demand and supply challenges
According to the statistics of NSTEC, the world’s total consumption of steel scrap added up to 558 million tonnes in 2023, and it estimates that the volume will rise to some 893 million tonnes by 2040.
Source: NSTEC
On the supply side, under ideal conditions, global steel scrap availability could reach 925 million tonnes in 2040, which would keep the demand for DRI as a substitute in EAF steelmaking at a low level around 132 million tonnes, according to NSTEC.
However, the actual supply of steel scrap may fall short due to imbalanced regional distribution or quality deficiencies, and in such cases, the demand for DRI could significantly increase, Tetsuro noted.
NSTEC predicts that in an extreme scenario, the proportion of DRI used in EAF feeds could reach 35% as of 2040, with total consumption likely to hit 321 million tonnes by that time.
DRI supply to grow, but may not be enough
Global DRI supply is expected to grow significantly in the coming years, potentially reaching 235 million tonnes by 2040, higher by 72.8% from the volume in 2023, NSTEC projects.
The bulk of the growth in DRI production is likely to come from Middle East and North Africa, where the DRI output could rise from 81 million tonnes in 2023 to reach 109 million tonnes over the next 15 years, the company’s data showed.
Source: NSTEC
If steel scrap supply shortages lead to large increases in DRI demand, the DRI market may also face insufficient availability, the data indicates.
“Even a small mismatch in the scrap supply and demand can lead to a large fluctuation in the demand for reduced iron, effectively creating a leverage effect,” Tetsuro stressed.
DRI’s role beyond scrap substitution
“The above predictions only take DRI as a substitute for steel scrap into consideration, but in fact, there will also be additional demand for the material, such as using it as a diluent for low-grade scrap,” he added.
In this way, not only with demand for DRI but also in terms of innovative technologies, more potential is lying ahead, Tetsuro commented.
Note: This article has been written in accordance with a content exchange agreement between MySteel Global and BigMint.
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