2022 is momentous pivot year for the steel industry, partly driven by the Russsian Ukraine invasion and recent devlopements in the USA.
The Ukraine war is and will contiune starving the likes of Turkey, South Korea and Japan of HBI and billets for years to come. Plus they have experienced huge energy cost and coal increases, none of this is going to change before the end of this decade at least, simply because fossil fuel and high grade iron feedstock production cannot just be switched back on even if the conflict ends. This gives the USA ,that has all the needed resources, a huge near and longterm advantage, that will both mop up steel inputs usually bound for other markets, increasing prices denominated in the ever stronger $USD.
The other factor is the USA inflation reduction act which means green hydrogen now gets a
$3 per KG subsidy vs its fossil fuel derived couterpart meaning it is viable to make green steel using either scrap or high grade magnetite as feedstock. As much of the USA steel industry already uses scrap and magnetite pellets, its far easier to transition to using green hydrogen and green electricity to replace fossil fuel inputs, requiring abundant wind and solar resources, that like Australia, they have. Wheras other steel making countries don't. This has created the following 3 favourable tail winds for HIO ore:
1/ Turkey, South Korea and Japan are scrambing for iron, see what's happening to Turkey
here. This is putting both scrap and pellet prices under upward pressure. The likes of Japan and Sth Korea have no longer have a cheap energy source and suffer a shortage of feedstock as they scamble replace Russian and Ukraine high grade iron pellets.
2/ Cheap green hydrogen will accelerate green steel technolgy in the USA as the likes of Ford and Tesla demand it for the exploding electric car market and the DRI process requires either scrap and/or high grade magnetite putting up price pressure on both in other countries. Scrap is ok for behind the scenes uses like hidden steel beams and rebar etc however for visible uses you need steel derived from a large % of virgin ore and for DRI or direct electrolysis that means magnetite. The re-shoring of massive amounts of industrial output done in China and elsewhere will accelerate this trend as many are now very concious of their carbon footprint, forget inflation and the recent stock market pullback, the good old USA is booming. So much that they may even have to take down the wall and offer border crossers jobs on the spot.... they are out of cheap labour.
3/ Location, location location....geography now matters. Hydrogen is hard and expensive to transport as it is such a small molecule it can leak and become a greenhouse gas itself. This means green steel plants need to be close to both huge wind and solar resources, scrap and magnetite ore. Three prime locations that fill the bill are the USA that has its own resources of all 3, Sweden (nuclear/Hydro) and Australia's Pilbara (excluding hematite) and HIO's Braemar.
Quite simply, if you are a steel mill in a country that doesnt produce its own gas and coal and/or possess abundant solar and wind resources it will be economic death by a thousand cuts. Such steel mills will need to migrate production to the likes of South Australia or at least produce feedstock iron here. Our government needs to realise then exploit this opportunity with vigor but going by past performance, where, both parties have shown little vision for decades, simply raking in lazy big bucks from the shovel and shipit economy. So realsitcally we will more likely just hang of the USA's coat tails as they blaze a trail so big it sucks us into the hydrogen and green steel vortex with local innovative companies partnering or more likely taken over by overseas co's that will do the heavy lifting.
And China? they will most likely bumble along with open blast furnaces using hematite ore, still largely using now very expensive imported coal and gas in both direct and indirect inputs. This means the increasingly rabid CCP are forced to subsidise both export steel production (US tariff on Chinese steel is 25%) whilst simultaneously propping up the now extremely wobbly property market bubble that consumes half their steel industries output. This is obviously unsustainable in the medium term even by CCP standards, so as I've postulated before, hematite demand and pricing will trend down whilst magnetite will trend up on the back of scrap prices and DRI demand.
Some steel mills and iron pellet suppliers (should we upgrade imported ore or export the now high priced gas to europe where it is in massive demand for greater profit?) have their fingers on the pulse and will be alarmed at rapidly declining profits of their imported fossil fueled domestic operations. HIO's high grade and significant magnetite output that can become operational quickly along with it's massive cheap green energy resource location will be looking better by the day through their eyes.
(20min delay)