Vale signs MOUs to develop ‘Mega Hubs’ in Middle East

Vale (NYSE: VALE) has signed three memorandums of understanding (MOUs) to jointly study the feasibility of developing industrial complexes or ‘mega hubs’ in the Kingdom of Saudi Arabia, the United Arab Emirates, and the Sultanate of Oman.

The hubs will produce hot briquetted iron (HBI) and steel products, Vale says, noting that “the production of HBI using natural gas emits around 60% less CO2 [carbon dioxide] than the pig iron production through the integrated BF-BoF [blast furnace-based oxygen furnace] route.”

Vale says it plans to build and operate iron ore concentration and briquetting plants to produce pellets within the hubs and “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 company explained in a press release. “These Mega Hubs shall supply different markets across the globe supporting the decarbonization of the steelmaking industry.”

Vale CEO Eduardo Bartolomeo noted that the partnerships “will be key to support the decarbonization of the steelmaking industry,” and Marcello Spinelli, the company’s executive vice president, iron ore, said he sees “great potential” in the direct reduction route, estimating that demand for high-grade agglomerated products will grow by 100 million tonnes over the next 15 to 20 years.

Spinelli also said the Middle East offers many advantages as a place to invest.  “We strongly believe that the Middle East, with its competitive energy prices, strategic location and entrepreneurial mindset, has a unique set of conditions to successfully develop these integrated hubs.”

The agreements were signed in the last week of October with Saudi Arabia’s National Industrial Development Center (NIDC); the Emirates Steel Arkan (ESA); and the Sultanate of Oman’s Ministry of Commerce, Industry and Investment Promotion.

Commenting on the MOUs in a research note, Colin Hamilton of BMO Capital Markets, said he sees “strong potential for DRI as an established lower-carbon transition technology to aid the steel industry,” adding that, “with developed markets likely to see reduced ferrous scrap exports these facilities could be crucial in supplying emerging market electric arc furnaces.”