Vale and the Indian steel group Essar have signed a letter of intent establishing a partnership to supply iron ore agglomerates for the Green Steel Arabia (GSA) project in Saudi Arabia. It is the first preliminary off take supply agreement signed by Vale with a client that will be installed in a Mega Hub, an industrial complex aimed at manufacturing low-carbon steel products.

Under the agreement, Vale will supply 4 million tons per year of iron ore agglomerates (pellets or briquettes) for the direct reduction route. The briquettes will be produced by Vale at the Mega Hub in Saudi Arabia. The pellets can be produced by the company in Oman or Brazil.

"This agreement represents an important step in the development of Mega Hubs, an innovative business model that aims to support the decarbonization of the steel sector and contribute to the global fight against climate change," explains Mr. Marcello Spinelli, Vice President of Iron Ore Solutions. “We have already announced Mega Hubs in Saudi Arabia, the United Arab Emirates and Oman”.

Mr. Naushad Ansari, Country Head for Essar Group in KSA, commented: “Essar is looking at investing about USD 4.5 billion in setting up an integrated steel plant in Ras Al Khair, Saudi Arabia. Through this LOI with Vale, and the previous LoI with another supplier, we will have secured 100% of the raw material supply of iron ore feed for the Saudi Steel Plant. Our plan is to start production in the year 2027”.

Last year, Vale announced agreements to develop Mega Hubs in Saudi Arabia, the United Arab Emirates and Oman. In these complexes, Vale is expected to build and operate concentration and briquetting plants within the hubs, providing secure supply of high-grade agglomerated products. Local parties are expected to promote the construction of the required logistics infrastructure. Investors and/or clients are expected to construct and operate the direct reduction plants and be off takers of HBI for either the export or domestic markets.

The Essar project aims to be the first Green Steel initiative in the region, aspiring to set a global benchmark for reducing CO2 emissions. It will consist of a direct reduced iron (DRI) capacity of 5mtpy. Furthermore, the project will include a hot strip capacity of 4 mtpy, along with 1 million tonnes of cold rolling capacity, as well as galvanizing and tin plate lines.

Iron ore solutions supporting low-carbon steelmaking

Vale has set a target of reducing its scope 3 emissions in the value chain by 15% by 2035, the equivalent to the emissions of a nation such as New Zealand. Vale has already signed more than 50 agreements with clients to offer decarbonization solutions, which account for 35% of the company's scope 3 emissions. Among the proposed solutions is the construction of briquette plants collocated on the premises of some clients, in addition to the Mega Hubs. Last week, Vale announced an agreement to study the development of similar industrial complexes in Brazil and North America.