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The conflict in the Middle East has cracked open the door for Australia to speed up the development of a handful of green iron projects as part of efforts to cut emissions from producing steel.
The immediate fallout from the US and Israeli attacks on Iran and the resultant retaliation has been surging crude oil and refined product prices amid the effective closure of the Strait of Hormuz and damage to the region's energy infrastructure.
However, among the second-round effects that are becoming more apparent is the possibility that ambitious plans to turn the Middle East into a major producer of green iron and steel may be delayed, or even curtailed.
The Middle East was shaping up as a major centre for the production of lower carbon iron, which is the process of using hydrogen or natural gas to make direct reduced iron (DRI) from iron ore.
DRI can then be used to make green steel in an electric arc furnace, or it can be converted into hot briquetted iron (HBI), which can be shipped to end users in another country for green steel production.
Brazilian iron-ore miner Vale is planning three major projects in the Middle East, which aim to use iron ore shipped from Brazil and a combination of natural gas and hydrogen to produce DRI for local steelmaking and HBI for export.
The most advanced of these projects is in Oman and a final investment decision was expected later this year.
Vale has two other projects planned in the Middle East, one in Saudi Arabia and the other in the United Arab Emirates.
While the Oman project sits outside the Strait of Hormuz, the planned Saudi and UAE plants are located west of the strait and would be dependent on vessels being able to transit the narrow waterway in order to both deliver iron ore and export HBI.
Vale hasn't made any public comments on the current Middle East conflict or whether this has had any impact on its investment plans in the region.
It is, however, reasonable to assume that the longer the war continues the more questions companies will be forced to ask about their investment plans, especially if the status of the Strait of Hormuz remains disputed.
"What is an uncomfortable situation for Vale may just be the opportunity Australia's green iron proponents have been looking for," Reuters reports.
GREEN IRON STRUGGLES
Australia is the world's largest exporter of iron ore, shipping about 75% of seaborne volumes.
Nonetheless, the country has struggled to launch a green iron industry, largely because the high cost of making hydrogen from renewable energy, coupled with expensive labour and extensive regulatory approvals, has largely rendered projects uneconomic.
There was considerable hype in recent years that if Australia invested billions of dollars in building a green iron value chain, it would reap an even larger dividend through higher prices for the lower carbon product.
The steel value chain accounts for 7% to 9% of global carbon emissions, the largest single industrial contributor and therefore a prime target for the net-zero-by-2050 goals of many countries and companies.
The problem is that about 80% of steel emissions come from a single step in the process, namely turning iron ore into pig, or crude, iron by removing oxygen and other impurities, a process that now involves using vast quantities of coal.
Using hydrogen made from renewables such as solar to replace coal brings the carbon intensity down to around 300 kg, or 661 pounds, per ton of steel, about one-seventh of the current 2.2 t of emissions.
REALITY REPLACES HYPE
The problem is always going to be doing this at a price that makes sense.
At last month's Global Iron Ore and Steel Conference in Perth it was clear that the green iron hype has been replaced by the reality that only a small nu...

Iran war allows Australia to revive green iron ambitions

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Iran war allows Australia to revive green iron ambitions