FEATURE: Global DRI production on the rise, yet China lags behind

DRI, produced by removing oxygen from iron ore without melting it, is an important raw material for steelmaking. The use of DRI can significantly reduce the need for coal and coke, leading to lower carbon emissions during the steelmaking process compared to conventional blast furnace (BF) methods, while mixing it with ferrous scrap in electric arc furnaces improves the quality of the melt, Mysteel Global notes.

Global direct reduced iron production 2020-2024 (million tonnes)

Source: WSA

India and Iran take the lead in DRI production

The significant growth of global DRI output during the past few years indicates that more steelmakers around the world are embracing the DRI path for 'green' steel production, particularly those in India and Iran, Mysteel Global notes.

India, the world's second largest steel producer behind China, produced 54.8 million tonnes of DRI in 2024, representing a substantial increase of 10.5% on year while also accounting for 38% of the world's total. In fact, the country has remained the top DRI producer globally for 21 straight years, WSA data show.

India's pioneering pursuit of DRI production is primarily driven by its long steel production that heavily relies on the EAF-route. The country has abundant iron ore reserves but is generally short of ferrous scrap, so DRI is a critical input for its EAF-route for steelmaking. Generally, coal is the energy source for 80% of India's DRI, with the remainder using gas as the redundant.

Another heavyweight player in global DRI is Iran, contributing 34.1 million tonnes to world DRI output last year, according to WSA. Iran's DRI producers can capitalize on the country's vast reserves of natural gas, which allows Iran to produce DRI at competitive costs, with limited environment impacts.

China left way behind in DRI development

Notably, China, the world's top steel producer, lags far behind in this green steel push through DRI. The country didn't start producing DRI until 2022, and its output in 2024 was only 1.2 million tonnes, or 0.8% of the world's total, according to the WSA data.

China faces multiple hurdles in expanding its DRI production, market pundits note. The country's domestic iron ore reserves are largely of low grade whereas high-grade ores are generally required to produce DRI using conventional technology. This means DRI producers would have to rely on imported ore whose prices are often more volatile than domestic concentrate prices.

Thin economic returns are another factor that daunts Chinese steelmakers in considering DRI development, as building new DRI facilities is expensive while DRI production costs are higher than those of traditional steelmaking raw materials inputs such as hot metal and scrap.  

Yet the world's largest steel producer is striving to catch up

Nonetheless, with China's central government committed to reducing carbon emissions in steelmaking to achieve its oft-stated dual goals of reaching carbon peak by 2030 and carbon neutrality by 2060, China has made progress in coal-based DRI production in recent years and is also actively exploring technologies such as hydrogen-based DRI.

In 2023, a subsidiary of China's steel manufacturing conglomerate Hebei Iron and Steel Group reportedly became the world's first steelmaker to produce DRI using more than 60% hydrogen in the feed gas mix in a pilot plant with a capacity of 600,000 t/y of high-quality DRI.

In February this year, China's state-owned steel producer Shougang Group launched a EAF-based integrated steel plant in Kazakhstan, incorporating DRI technology, as reported. A 960,000 t/y hydrogen-based shaft furnace DRI plant is planned to be built in the first phase.

Last month, China Baowu Steel Group, the world's largest steelmaker, and Australian mining giant BHP successfully proved that BHP's Pilbara iron fines could be pelletised before being converted to DRI in a hydrogen-based DRI shaft furnace built in China. This demonstrated "the use of BHP Pilbara iron ores as a blend material suitable for commercial DRI production", according to BHP's announcement.

As more Chinese steel mills turn to DRI for the low-carbon future of steelmaking, the country's DRI production is poised to see more growth in the future in line with Beijing's commitment to decarbonize the steel industry. However, it will still take time for China to become a force in global DRI production, given that the blast furnace-basic oxygen furnace route for steel production is so entrenched in China.

"Deep decarbonisation would require substantial investments in zero-emission steelmaking technologies, as well as the early retirement of carbon-intensive facilities, yet the sector's persistent overcapacity and thin profitability is complicating the transition to cleaner steelmaking methods," a recent report from Finland's Center for Research on Energy and Clean Air on China's steel sector noted.  

A market watcher in Shanghai put it more succinctly. "Steelmakers are unwilling to replace their BFs with new high-cost steelmaking facilities, such as DRI and EAF-based routes," she said candidly. BF-based steelmaking is now dominant in China, with most established BFs expected to remain operational for about another 15 years. Mysteel's survey shows that this year, 5 large-sized blast furnaces are scheduled to be commissioned in China adding 9.3 million t/y to capacity, while 15 blast furnaces with total capacity of 12 million t/y will be shut down.

Written by Irene Zhuang, zhuangailing@mysteel.com

Edited by Russ McCulloch, russ.mcculloch@mysteel.com