Own BHP shares? Here’s how the iron ore giant is cleaning up steelmaking’s act

BHP Group Ltd (ASX: BHP) might not be the first share one thinks of when it comes to sustainability.

But the S&P/ASX 200 Index (ASX: XJO) iron ore giant is taking a leap towards lowering its value chain emissions. It announced yesterday it’s considering building an electric smelting furnace (ESF) pilot plant in Australia.

The Big Australian has signed with engineering firm Hatch to design a demonstration facility capable of producing steel using renewable energy and hydrogen rather than coal.

Let’s take a look at what the news might mean for Pilbara-mined iron ore.

The BHP share price is $43.63 at the time of writing.

BHP moves to make steelmaking more sustainable

Own BHP shares? You might be interested in the monolith’s latest sustainability move – a planned ESF plant capable of lowering emissions associated with Pilbara iron ore’s journey to becoming steel.

The company is aiming to build a demonstration plant to test and optimise iron production from the ESF.

It hopes the small-scale plant will be used to collaborate with steel producers and technology providers, ultimately helping to speed up the scale-up of ESF plant designs.  

The technology is able to produce steel from renewable energy sources when combined with a direct reduced iron (DRI) step.

The ESF allows for greater flexibility in raw materials – a barrier to the adoption of other lower emissions production methods. It also has the potential to be integrated into a steel plant’s existing downstream production units, BHP noted.

It’s estimated that, by switching to the technology, conventional steelmakers – like many of BHP’s customers – could reduce their emissions by more than 80%.

BHP will consider several Australian locations for the facility.

News of the move comes as the ASX 200 giant works to reach net zero operational and value chain emissions by 2050. It also comes alongside news that iron ore rival Fortescue Metals Group Ltd (ASX: FMG) has made progress in producing ‘green iron’.

Commenting on the agreement, BHP chief commercial officer Vandita Pant said:

We see the ESF process as a critical breakthrough in significantly reducing the carbon emissions intensity of steel production and one that provides an opportunity for iron ore from our Pilbara mines. 

BHP share price snapshot

This year has been a rough one so far for the BHP share price.

The stock has fallen around 4% since its first close of 2023. Though, it’s trading relatively flat over the last 12 months.

Comparatively, the ASX 200 is trading flat year to date and has fallen 6% since this time last year.

The post Own BHP shares? Here’s how the iron ore giant is cleaning up steelmaking’s act appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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