As the global industry sector seeks to reduce or eliminate its carbon footprint, a number of MENA countries are investing in green steel production to capture market share and help meet emissions targets. Industry generates 20% of global greenhouse gas emissions annually, with the steel manufacturing segment accounting for the largest share, at 7%, due in part to a reliance on coal to heat smelting furnaces. According to a September 2022 report from the Institute for Energy Economics and Financial Analysis, the MENA region is well positioned to lead global steel decarbonisation due to its use of lower-emissions smelting processes and planned developments in green hydrogen production – an attractive energy source for green steel.
Prepared for Change
Steel is composed of 98% iron, which is traditionally smelted in furnaces heated with coal at 1400°C to remove impurities. This process is responsible for some 90% of the greenhouse gases created by its production, according to a September 2022 report from climate alliance Mission Possible Partnership. The international steel industry will require $47bn in annual investment between 2023 and 2053 to meet demand growth, with an additional $8bn-11bn of investment needed to transition to net-zero processes.
In MENA steel is made primarily through the direct reduced (DR) iron process, which uses natural gas-powered electric arc furnaces, and results in a smaller carbon footprint than traditional smelting furnaces. Despite accounting for 3% of the world’s crude steel in 2021, the region produced roughly 46% of global DR iron. Due to a steady supply of natural gas and DR-grade iron pellets, and the presence of some of the world’s largest ore-pelletising facilities, MENA countries are primed to increase the output of low-emissions steel.
Expanding Capacity
The global steel industry generates more than $870bn in revenue each year, creating opportunities for economies willing to invest in green energy technologies. With hydrogen central to the region’s energy transition, many countries are looking to this energy source to power their green steel industries. Oman steel company Jindal Shadeed Iron and Steel is investing $3bn in a green steel plant located in the Duqm Special Economic Zone. Powered by green hydrogen, the plant is expected to produce 5m tonnes of steel annually upon completion in 2026. The company is targeting exports to the automotive, consumer durables and wind power segments in the EU, Japan and other GCC countries.
In October 2022 Brazil’s Vale, a metal and mining company, signed three memoranda of understanding with entities in the GCC for feasibility studies to establish industrial complexes capable of producing low-carbon footprint products in the steel segment. The complexes will be located in Ras Al Khair Industrial City in Saudi Arabia, Khalifa Economic Zone Abu Dhabi in the UAE and Duqm Special Economic Zone in Oman.
Upcoming Projects
In January 2023 Prince Abdulaziz bin Salman Al Saud, Saudi Arabia’s minister of energy, announced plans to invest $266bn by 2030 to support the Kingdom’s clean energy targets. Some of the funds could go towards green hydrogen to power heavy industries such as steel production. As of 2021 Saudi Arabia was the world’s 21st-largest steel-producing country, manufacturing some 8.7m tonnes annually.
Green energy developments in the UAE are partly targeted to meet the emissions requirements of the European Green Deal, a roadmap approved in 2020 to decarbonise the EU’s economy. Furthermore, European markets could turn to UAE steel when a ban on Russian steel, implemented in response to its February 2022 invasion of Ukraine, takes effect in September 2023. Emirates Steel Arkan, in particular, has begun incorporating green hydrogen into its manufacturing processes. The company has achieved a lower carbon footprint than the world’s leading steel producers in China and India due to the use of natural gas to power electric arc furnaces, which have a carbon intensity 75% lower than traditional coal-powered blast furnaces.
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