Anglo American (LSE: AAL) and German steel producer Salzgitter Flachstahl will work together on decarbonizing the steel sector by exploring ways to reduce carbon emissions.
The partners intend to conduct research into feed materials, including iron ore pellets and lump iron ores, suitable for use in direct reduction (DR) steelmaking based on natural gas and hydrogen.
"This is a significantly less carbon-intensive method than the conventionally used blast furnace (BF) process," Anglo American said.
The company, which produces iron ore concentrates and fines at its operations in Brazil and South Africa, has a target to achieve carbon neutrality across its operations by 2040.
Iron ore is vital in the production of steel. The process involves adding coking coal to iron ore to make the alloy, which makes the steelmaking sector one of the world's heaviest polluters, responsible for up to 9% of global greenhouse emissions.
"While steel is a critical building block of our modern lives, and itself a critically needed material for the energy transition, the steel industry is a significant producer of carbon dioxide," Peter Whitcutt, chief executive of Anglo American's marketing business, said in the statement.
The European steel industry has been developing new steelmaking technologies to reduce its carbon footprint, with Salzgitter working to produce steel as resource-efficiently as possible under its SALCOS (Salzgitter Low CO2 Steelmaking) project. The initiative is targeting a switch from the use of BF based on coal to wholly DR steelmaking.
Anglo American produced 15.7 million tonnes of iron ore in the April-June quarter, up 6% compared to the same period last year. The company expects to produce between 64.5 million tonnes and 66.5 million tonnes this year.
Rather than set hard targets to reduce so-called Scope 3 emissions, the one generated by customers, major iron ore producers including Rio Tinto (NYSE: RIO; LSE: RIO; ASX: RIO) and BHP (NYSE: BHP; LSE: BHP; ASX: BHP) have committed to working with the steel sector to help develop new technologies instead.
Rio Tinto is already working with and POSCO (NYSE: PKX), South Korea's largest steel producer, to explore a range of technologies for decarbonization across the value chain from iron ore mining to steelmaking.
The company also teamed up in February with two European companies to explore production of low-emission hot briquetted iron (HBI) in Canada
The two initiatives build on Rio's decision, unveiled in December, to invest $10 million in low-carbon steelmaking projects over the next two years, as part of its partnership with China Baowu Steel Group, the nation's largest steel producer.
Vale (NYSE: VALE) and BHP, the no. 1 and no. 2 iron ore producers, respectively, have both invested in Boston Metal, a startup seeking to develop less-polluting ways of making steel.