MethodologyContact usLogin
The MENA region is already well equipped to produce cheap, green hydrogen because of its extensive solar resources, but the fact that its steel industry is mainly focused on the use of direct-reduced iron (DRI) modules and electric-arc furnaces puts it in a unique position in terms of producing the low-carbon steel that is becoming increasingly popular in Europe as countries there strive to achieve their net-zero emissions targets.
Learn more about MENA’s role in the green steel market.
Join 1,000+ senior decision makers at Middle East Iron & Steel. This is your opportunity to meet, network and negotiate with the who’s who of the region across three days.
According to a report by the US-based Institute for Energy Economics & Financial Analysis (IEEFA) published on Thursday November 16, while steelmakers in the MENA region currently account for 3% of global steel production, about 46% of their output is DRI-based.
So, being in a position to use its solar energy resources to produce green hydrogen for DRI-based steelmaking, means the MENA region is perfectly placed to supply the key steel growth market of India and service the green steel demands of countries in Europe, IEEFA said.
And, according to IEEFA and the Boston Consulting Group, the region may have invested $1 trillion in renewable energy sources by the end of 2023.
There is a strong focus on hydrogen – which is the ideal green fuel for DRI modules – in the region and MENA is expected to produce 18.15 million tonnes of hydrogen by 2030 and 28 million tonnes by 2040.
Hydrogen-compatible steel plants are being built in Egypt, the UAE, Saudi Arabia, Oman and Algeria. And while those facilities will initially run on gas, they will eventually switch to running on hydrogen.
“Rather than trying to find a viable way to export green hydrogen, which looks inefficient and expensive to transport, the region should prioritize its domestic use, such as in its DRI plants,” IEEFA’s lead steel analyst Simon Nicholas said in the report.
Steelmakers around the world are already transitioning from blast furnace-based production towards DRI technology that can run on green hydrogen,” he said.
“MENA has an advantage given that its steel sector is already based on DRI, with established access to both direct reduction-grade (DR-grade) iron ore and the renewable energy resources that will allow it to produce cheap green hydrogen in the near future.”
A low-carbon local steel industry would also give MENA a big advantage over other regions when Europe’s Carbon Border Adjustment Mechanism (CBAM) comes into force.
The Euorpean Union’s CBAM entered the transition phase of its implementation on October 1 and the duties are scheduled to be applied from January 1, 2026.
Once CBAM is fully phased in, MENA-based steelmakers will have an opportunity to crowd out more carbon-intensive Asian steel producers in the European steel imports market.
In 2022, total carbon steel imports to the EU amounted to 27.07 million tonnes according to European steel association, Eurofer.
The main suppliers were Turkey (15.4%), South Korea (10.3%), India (9.13%) Taiwan (6.6%), Vietnam (5.4%) and Japan (5.33%), with Egypt (2.9%) the top performer from MENA.
But in 2023, Turkish deliveries to the EU have fallen because mills there have been unable to compete with Asian suppliers due to having higher production costs and being hit be anti-dumping duties. Total steel export volumes from Turkey to the EU in the first three quarters of the year amounted to just 1.50 million tonnes.
And Asian suppliers boosted their steel deliveries to the EU over the same period, with Vietnam supplying 1.50 million tonnes of carbon steel to the bloc, up from 1.46 million tonnes for the whole of 2022.
But market participants expect the implementation of CBAM to seriously limit interest in carbon-intensive steel from Asia.
And while steelmakers in South Korea and Japan are already planning to import hot-briquetted iron (HBI) from places such as the Middle East and are also planning projects that would initially use fossil gas before switching to green hydrogen as it gets cheaper, MENA steelmakers are already several steps ahead because they do not need to make substantial investments to replace their base technology, according to IEEAF.
Emphasizing the region’s focus on green initiatives, on Tuesday, Turkey’s Energy Market Regulatory Authority (EMRA) published a draft consultation on how the carbon market will operate in the country.
The MENA region’s access to high-grade iron ore is already set to increase and the leading producer of DR-grade iron ore, Vale, is planning to set up green iron “mega hubs” in the Middle East to supply iron ore pellets to co-located DRI plants to produce HBI for local consumption and export.
Imported, green HBI will be crucial to the EU’s decarbonization drive, with a number of DRI modules expected to come online as early as 2026 and MENA is ideally placed geographically to supply those needs.
Along with global decarbonization efforts, iron-ore production is expected to dislocate from steel production and shift closer to renewable energy sources.
“More iron ore will be processed in places with excellent renewable energy resources that can produce cheap green hydrogen, with the resultant iron shipped to centers of steel demand. MENA can be a global leader in the emerging green iron trade, but it faces strong competition from Australia, Brazil and Canada,” IEEFA steel analyst Soroush Basirat said.