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    Report: MENA Could Lead Green Hydrogen Use in Steel Industry

    Green hydrogen is presented as a key to decarbonizing the steel industry which is responsible for 7% of global CO2 emissions.

    19 Sep 2022

    Rabat - Given governmental efforts to advance renewable energy infrastructure in some Middle Eastern and African countries, the region is expected to become a leading producer of carbon-neutral steel.

    According to the Institute for Energy Economics and Financial Analysis (IEEFA), the MENA region can benefit from the shift in the global steel industry to direct reduced iron (DRI) which uses green hydrogen to cut emissions.

    The MENA’s dominant use of direct reduced iron-electric arc furnace (DRI-EAF) technology, which releases lower emissions than coal-fueled or basic oxygen furnaces, puts the region in an advantageous situation to lead the global sectoral change and meet zero emissions goals.

    “With ample renewable energy potential, the region could become a leader in hard-to-abate and carbon intensive industries, specifically steel,” says Soroush Basirat, Energy Financial Analyst at IEEFA.

    As the MENA region produced 46% of global DRI and 3% of global crude steel in 2021, the region's “existing DRI-EAF capacity means no extra investment is needed for replacing the base technology,” says Basirat.

    She added, “All new investment could be focused on expanding production of green hydrogen among other renewables.”

    The financial analyst further argues that the MENA’s steel industry must, as a first step, replace 30% of natural gas in DR plants with hydrogen. This change could be achieved without “any major equipment modifications.” The region can then move to 100% use of green hydrogen to produce carbon-free steel.

    To date, DRI-EAF predominantly uses natural gas which produces lower carbon emissions than other methods of steel production.

    Citing BloombergNEF estimates, the IEEFA report says that hydrogen-based DRI-EAF production is set to represent 56% of total primary steel production (840 million tonnes) by 2050, in a net zero emissions scenario.

    As Europe seeks to establish its Carbon Border Adjustment Mechanisms while the demand for green steel is rising thanks to the European automotive industry, Basirat suggests that “MENA steel exports would have an advantage if they were zero carbon.”

    Recent reports have underscored MENA’s potential in producing green hydrogen at a low cost, with Morocco for instance expected to deliver the third chepest green hydrogen in the world by 2050.

    Egypt, for its part, has launched billions of dollars in investment to develop green hydrogen infrastructure. Meanwhile, Gulf countries have gradually turned to renewable energies in an effort to diversify their economies and align with global trends.

    What about Morocco?

    According to Ismail Akalay, Director General of Sonasid, a Moroccan steel manufacturing company owned by the royal holding ON Group, Morocco’s steel industry primarily recycles iron scraps into concrete reinforcing steel bars and wires, leading to lower carbon emissions.

    Morocco, Tunisia, Kuwait, Jordan and Israel are notably the only countries in the MENA region producing iron from scraps with the use of electric arc furnace (EAF) technology.

    Globally, only 20% of the steel industry uses scrap steel instead of iron ore. However, scrap-based steel production or recycled production can be valuable in reducing energy demand and CO2 emissions, says the International Energy Agency (IEA), since it is less energy-intensive than primary production with iron ore.

    As the world moves towards cleaner steel production, Morocco’s familiarity with scrap-based steelmaking and its well-established renewables infrastructure reinforces the country’s competitive advantage in the global steel market.

    In March, Akalay said in an interviewwith MAP: “We have production capacities that far exceed market demand. And it is in this sense that we are interested in taking advantage of the African Continental Free Trade Area (ACFTA) to be able to export part of our production.”

    He added that Morocco sells about 250,000 tonnes of wire rods and 1.2 million tonnes of reinforcing steel bars.

    Given Morocco’s plans to decarbonize industry and increase steel exports to African countries, the North African country is expected to increase its regional and global share in the steel industry thanks to the global shift toward cleaner steel production.

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