Itochu set to establish global low-carbon iron supply
Itochu, a Japanese trading house, is set to establish a global supply chain for reduced iron, a low-carbon steel feedstock. The supply chain will link Brazil, the UAE, and Japan to help reduce the steel industry’s carbon emissions. High-grade iron ore from Brazil will be processed into reduced iron in the UAE and then shipped to Japan.
Itochu will partner with Emirates Steel Arkan and others to conduct a feasibility study, with the plant expected to start operations in 2027 or later.
Moreover, Itochu plans to produce about 2.5 million metric tons of reduced iron annually in Abu Dhabi beginning in 2027, in collaboration with JFE Steel and Emirates Steel, leveraging the UAE’s affordable natural gas supply.
The iron ore will be supplied by CSN Mineracao, a Brazilian company partly-owned by Itochu, JFE Steel, and Kobe Steel. CSN Mineracao will open a new plant in Minas Gerais, Brazil, to produce pellet feed for export to the UAE starting in 2027.
This initiative aims to support Japan’s steel industry in its decarbonisation efforts, as it currently accounts for 10 per cent of the country’s emissions. Using reduced iron in electric furnaces instead of the traditional blast furnace method significantly reduces CO2 emissions.
Blending reduced iron with scrap steel allows electric furnaces to produce high-grade steel suitable for automobiles and other products. JFE Steel plans to operate a large-scale electric furnace in Okayama by April 2027, using reduced iron from Abu Dhabi.
In 2022, Japan’s steel industry emitted about 134 million tons of CO2, representing 38 per cent of industrial emissions and 10 per cent of total emissions. While direct hydrogen reduction technology is advancing, it is not yet ready for widespread use.
Demand for reduced iron, which can rapidly reduce emissions, is growing. The global market is projected to reach $115.4 billion by 2032, more than doubling the 2024 forecast. Mitsui & Co. and Kobe Steel are also considering building a reduced iron plant in Oman, with production slated to begin in 2027.
