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Global demand for steel is rising, and with it, emissions from the coal-fired blast furnaces that churn out around 70% of the world’s supply. American steelmakers are less reliant on blast furnaces than other countries, but they are doubling down on plans to extend the lives of the handful still operating in the U.S.
As those same steelmakers plan new facilities, though, they are embracing a cleaner technology called direct reduced iron, or DRI, to purify iron ore, the first step in the production of primary steel.
The DRI process uses a high-temperature gas to remove oxygen from the ore. The remaining iron can then be added to a traditional basic oxygen furnace or, more commonly in modern systems equipped with DRI, to an electric arc furnace that can be powered by carbon-free electricity.
Most DRI plants operating today use natural gas, a fossil fuel primarily made up of planet-warming methane. But even those can produce 50% less carbon emissions than coal-fired blast furnaces — and if the technology can be paired with carbon capture or fueled instead by green hydrogen, carbon-free steel becomes a possibility.
While DRI facilities account for just 9% of global ironmaking capacity today, they comprise nearly 40% of what’s under development. The U.S., for its part, has only three DRI plants up and running — but every new ironmaking facility slated to be built in the country will use DRI. That includes South Korean automaker Hyundai’s planned DRI plant in Louisiana, which the company announced in March.
The technology for DRI has existed for more than half a century, but it’s made exclusively by two firms that few outside the industry have ever heard of: Midrex Technologies and Tenova. Now, as some countries seek to build steel plants that don’t burn coal, these two firms are poised to reap the benefits.
Midrex Technologies dominates the DRI market. The North Carolina-based company built the first U.S. plant using the technology in Portland, Oregon, in 1969.
“DRI has a bigger and bigger role to play in the energy transition. The long-term view for DRI is positive. Demand for DRI keeps increasing,” said Vincent Chevrier, Midrex’s general manager of technical sales and marketing. “It’s probably going to double, then triple, in the next 20 years.”
The other major manufacturer, Tenova — owned by the Buenos Aires-based Techint, with technology jointly developed with Italy’s steel giant Danieli — started making DRI technology at the turn of this century. With just a fraction of the market, the firm may be the underdog, but CEO Francesco Memoli sees an advantage.
Tenova’s technology can swap out natural gas for hydrogen without any modifications. While Midrex says its equipment needs only minor upgrades to optimize for hydrogen, Tenova said the innate flexibility of its system allows it to ride out whichever way the political tides turn in the U.S.
Lately those tides have been turning against green steel.
In January, just before President Donald Trump’s inauguration, the Swedish steelmaker SSAB bowed out of negotiations for $500 million in federal funding the Biden administration had put up to support a DRI plant powered entirely with green hydrogen in Mississippi.
Cleveland-Cliffs — considered the more progressive of the American steelmakers — has suggested it would abandon its plans to build a DRI facility and use hydrogen to produce steel at its Middletown, Ohio, plant as it renegotiates the $500 million grant it had been awarded with the Trump administration.
Weeks after Cleveland-Cliffs started backing away from the project, Nippon Steel secured Trump’s approval to take over American rival U.S. Steel. The Japanese behemoth, the world’s fourth-largest steel producer, lags so far behind other companies in developing a decarbonization plan that the watchdog group SteelWatch recently described Nippon as “a coal company that also makes steel.” While Nippon has pledged to build a new electric arc furnace, a machine that uses electricity to turn scrap metal into fresh steel, the company has also staked out plans to extend the operations of U.S. Steel’s existing blast furnaces.
Meanwhile, Republicans in Congress have proposed eliminating the federal tax credit meant to spur green hydrogen production, which would create yet another setback.
In the near term, most of the new DRI plants in the U.S. will likely run on gas, Memoli said.
“Natural gas is very accessible in the U.S.,” he said.
Already, Tenova can capture some of the emissions from the gas it uses. Steelmaker Nucor deploys Tenova equipment at its plant in Louisiana, which last year set a world record for DRI production. In 2023, Nucor inked a deal with Exxon Mobil Corp. to capture and store the carbon from the steelmaker’s DRI process.
In Mexico, the Latin American steelmaker Ternium funnels CO2 captured from Tenova’s DRI equipment to Coca-Cola, Memoli said. Tenova puts the gas through two rounds of cleaning until it’s safe for use in beverages, and sells it to another company that in turn supplies the CO2 to Coca-Cola.
“All of the soda produced in Mexico by Coca-Cola is using CO2 recycled from an ironmaking plant,” Memoli said. “The joke is that Mexican Coke tastes better because of that.”
While the CO2 emitted by the DRI process is captured in the Tenova system, Memoli said the carbon produced from heating the gas to 1,000 degrees Celsius remains a source of pollution. The company is planning to roll out new features in the next few years to capture even that “residual” CO2.
Elsewhere, the company’s equipment is already running on hydrogen, or will be soon.
Last year, a major Swedish green metal project selected Tenova’s technology to generate iron with 100% hydrogen for the steelmaking giant SSAB. The fuel is gaining ground in China, too, which lacks domestic gas resources. Tenova-equipped plants in the world’s second-largest economy are already churning out 700,000 tons of iron per year using anywhere from 30% to 70% hydrogen, Memoli said, though only some of that hydrogen is green. The world produces about 2.5 billion tons of iron each year, for context.
Despite the headwinds for hydrogen-based steelmaking in the U.S., the industry could still move away from traditional steel plants (also called integrated plants because of their use of blast furnaces and basic oxygen furnaces) in the coming years. Industry analysts say DRI is the technology that will enable this shift — one that some say is critical both economically and for the climate.
“Blast furnace technology is outdated — full stop. It’s too dirty, it’s too energy intensive, and it’s too inefficient,” said Elizabeth Boatman, a lead consultant at 5 Lakes Energy, a Michigan-based research firm. “Overhauling our integrated mill fleet will be expensive, but it’s an investment that will pay off in the long term.”
Already, mini mills across the U.S. make use of the large volumes of scrap metal in the U.S. to produce lower-carbon steel than what coal-fired plants in China make fresh.
“What we are seeing, because of the switch of energy from coal, is that it offers the possibility of decoupling ironmaking from steelmaking,” said Midrex’s Chevrier. “You can place your ironmaking facility where the energy is cheap, and maintain your steelmaking facility at the location where your customers are and your scrap is.”
That could also create an opening for some of the startups looking to popularize next-generation ironmaking techniques. The Colorado-based company Electra, which aims to use a process called “electrowinning” to purify iron without a blast furnace, raised $186 million in April to support its scale-up. The Massachusetts Institute of Technology green steel spin-off Boston Metal, meanwhile, is inching toward its first commercial revenue.
Memoli said Tenova’s own research and development teams are working on similar technology. But he warned that it’s unlikely to be able to scale up fast enough in the near term to compete with DRI or blast furnaces.
A medium-sized blast furnace can churn out enough iron for 3 million tons of steel per year. A DRI plant can reach about 2.5 million tons. It’ll be decades before any of these newer electricity-based technologies reach that scale, Memoli said.
“The level of development of those technologies is still at a very early stage,” he said.
“We’re still talking about 20 years, 30 years from now. We need to be conscious of what are the targets and what are the deadlines today,” he added. “If we wait for something like that, the target of cleaning the planet will be pushed down and the cost of cleaning the planet will be much higher.”
Memoli said he wants to see more competition in the DRI space.
“Today there are only two companies – us and Midrex. Two is not enough,” Memoli said. “Not even four would be enough to develop all the projects that potentially could happen. Anybody with a green solution is welcome.”
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