Rio Tinto RIO has joined forces with BHP Group BHP and BlueScope to develop Australia’s largest ironmaking electric smelting furnace (ESF) pilot plant in Western Australia. The BHP-RIO alliance will work on processing iron sourced from Pilbara using an electric furnace replacing traditional blast furnaces.
This could lead the way in decarbonizing the steelmaking process, which is the need of the hour considering that steel production accounts for around 8% of the world’s carbon emissions.
Details of RIO & BHP’s Groundbreaking Project
RIO, BHP and Bluescope, Australia’s largest steelmaker, formed the NeoSmelt collaboration in February. This combined BHP and Rio Tinto’s knowledge of Pilbara iron ore with BlueScope’s unique operating experience in ESF technology. BlueScope is the operator of the world’s only ESF processing direct reduced iron (DRI) in New Zealand.
Woodside Energy will also join as an equal equity participant and energy supplier, subject to the finalization of commercial arrangements.
The NeoSmelt pilot plant will test and optimize production of iron from the ESF. The ESF is capable of producing iron suitable for the basic oxygen steelmaking process. Iron ore is first converted to DRI before being charged into the ESF. The DRI-ESF equipment can replace the traditional blast furnace. This can help in reductions of up to 80% in CO2 emission intensity compared with the conventional blast furnace steel route.
The pilot plant would produce molten iron in the range of 30,000-40,000 tons a year. It will initially use natural gas to reduce iron ore to DRI. Once operational, the project aims to use lower-carbon emissions hydrogen for the process. The Western Australian Government will make A$75 million contribution to the project.
Subject to funding, the project expects to start feasibility studies in the second quarter of 2025. The final investment decision for the pilot plant is expected in 2026, with operations anticipated to start in 2028.
Efforts by RIO & Other Industry Players to Lower Emissions
Steelmaking is responsible for around 8% of the world’s carbon emissions. Most of these emissions are created during the industrial process of transforming the raw material, iron ore, into steel. Miners, through individual research and partnerships, are working on developing technologies and solutions to reduce the greenhouse gas (GHG) emission intensity of the steelmaking process.
Steelmaking accounted for 69% of Rio Tinto’s Scope 3 emissions in 2023. It has targeted reductions in Scope 1 and 2 carbon emissions of 15% by 2025 and 50% by 2030, relative to 2018 levels. The company expects to achieve net zero emissions from its operations by 2050.
In 2023, RIO achieved a 6% reduction in Scope 1 and 2 GHG emissions, which was below its 2018 baseline. The company has budgeted a total capital spending of $5-$6 billion over the 2022-2030 period, including $1.5 billion cumulative spending over the 2024-2026 period.
Fortescue Ltd FSUGY remains committed to eliminating fossil fuels with a target to achieve Real Zero terrestrial emissions (Scope 1 and 2) by 2030. The company targets to achieve Net Zero Scope 3 emissions by 2040. The steelmaking process is the largest source of its Scope 3 emissions, accounting for 97% of Fortescue’s Scope 3 emissions.
In September 2022, the company committed $6.2 billion to decarbonize Pilbara operations. Fortescue’s fiscal 2025 projected capital guidance for decarbonization is $700 – $900 million.
BHP Group is also pursuing its long-term goal of net zero Scope 3 GHG emissions by 2050. The company expects to cut down operational GHG emissions by at least 30% from 2020 levels by 2030.
BHP aims to support the development of steel production technology capable of 30% lower emission intensity compared with conventional blast furnace steelmaking. In fiscal 2024, BHP lowered Scope 1 and 2 emissions by 32% compared with the fiscal 2020 baseline. From this decade to fiscal 2030, BHP expects to spend around $4 billion on operational decarbonization.
VALE S.A. VALE plans to invest at least $2 billion to reduce its direct and indirect carbon emissions (Scope 1 and 2) by 33% by 2030 compared with its emissions in 2017. It will also help reduce its suppliers’ emissions (Scope 3) by 15% by 2035 compared with the emission level in 2018. Vale aims to become carbon neutral by 2050.
RIO Stock Price Performance & Zacks Rank
In the past year, shares of Rio Tinto have lost 17.7% compared with the iron mining industry’s 18.3% decline.
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Rio Tinto currently carries a Zacks Rank #5 (Strong Sell).
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