Growth and diversification: supplying steelmaking raw materials

Matt Latimore, President M Resources

As the planet moves through a period of unprecedented change and investment, both steel and the raw materials required for steelmaking will remain at the centre of economic development in our region and across the globe.

By providing substantial amounts of the coal and iron ore required for steelmaking, Queensland and Australia will continue to play a crucial role in the future of the global economy. The fundamentals that we at M Resources see in our resources outlook convince us that the supply of steelmaking raw materials, including coal, will remain an important part of this picture for decades to come.

Our coal is perhaps more important today than ever before, as it enables the transition and electrification of our energy systems. Electric vehicles, solar panels, wind turbines, and transmission upgrades all require steel.

Our outlook: forward-leaning, high-confidence

M Group is an Australian company focused on supplying steelmaking raw materials to the world’s most significant steelmakers, during a phase of great transition in the Australian metallurgical coal sector.

Since 2016, we have grown our coal handling ten-fold, and invested in businesses adjacent to metallurgical coal, such as coal haulage, underground mining services, and port and mine infrastructure. A recent investment was in vanadium, a critical mineral with applications in steelmaking.

We are doing this because we have high confidence in the future of the metallurgical coal and steelmaking industry. Our view is centred on balancing the most basic economic equation: supply versus demand.

Boston Consulting Group, McKinsey, and Bloomberg estimate the scale of investment in energy transition will range from US$100 trillion to US$300 trillion by 2050.

Over the next few decades the fundamentals of demand steelmaking raw materials, including metallurgical coal, remain very strong. In contrast, supply will continue to be constrained.

The result is scarcity.

Where will new steel demand come from?

New demand for steel will come from continued strong economic growth in advanced and developing economies.

The United States is undertaking one of the greatest-ever expansions of infrastructure expenditure in its history. In India, Southeast Asia, and China, industrial bases and infrastructure delivery are growing rapidly.

There is also a massive global energy transition underway, requiring more copper, nickel, critical minerals, and iron than forecast production can supply. Steel is a critical ingredient for this transition, needed for energy-efficient homes and buildings, electric vehicles, solar panel arrays, wind turbines, and electricity infrastructure, including significant upgrades of energy transmission.

Well-known sources like Boston Consulting Group, McKinsey, and Bloomberg estimate the scale of investment in energy transition will range from US$100 trillion to US$300 trillion by 2050. These extraordinary numbers highlight the incredible investment in technology and construction required to ensure reliable and safe energy supply for the planet through to 2050.

M Resources is dedicated to meeting the ongoing demand for steelmaking raw materials. We will continue to strengthen our existing partnerships and build new ones to deliver critical raw materials to the world.

Will the demand for metallurgical coal last?

An important part of our mission is understanding the place of metallurgical coal in all of this. Today, most global steelmaking continues to be from BF-

BOF (Blast Furnace-Basic Oxygen Furnace) requiring coking coal, for which there is no currently available, at-scale alternative.

While ‘Green Steel’ is receiving investment and the technology is developing, the scale of steel demand means that metallurgical coal will be required for the long term. Key factors for this include:

• Increasing installed capacity for BFBOF steelmaking.

• A lack of scrap and high-grade iron ore pellet products.

• Concerns over access to sufficient capacity of green hydrogen and energy.

This means that a transition to green steel is uncertain, particularly given that investments in new EAF steelmaking capacity are highly capital-intensive and have long payback periods.

Anticipated constraints on supply of met coal

While demand for steel made with metallurgical coal remains strong, its supply is likely to become increasingly constrained. Underinvestment, slow approvals, finance restrictions, and high and increasing levels of regulation are significant concerns for our resources sector and steelmaking customers.

Prime hard coking coal assets are becoming increasingly scarce. Greenfields projects are slow and rare in Australia, while expansions and life-of-mine extensions require great patience and access to alternative, nontraditional, non-bank sources of capital.

In summary, demand for steel will remain high, alternatives to using metallurgical coal will remain limited, and new metallurgical coal developments will be slow and constrained. The result is that metallurgical coal prices will stay stronger for longer.

How does metallurgical coal fit into the climate change picture?

We are conscious that steelmaking currently contributes just over 7% of global emissions.

At the same time, steel is a critical enabler in reducing emissions across three broad sector categories.

• Energy use in industry, excluding iron and steel production, contributes around 17% of global emissions. These emissions can be reduced by using steel to upgrade and replace energy systems using solar cells, wind turbines, and electricity transmission infrastructure necessary for electrification.

• Transport contributes around 16.2% of global emissions. Steel is essential to the task of replacing fossil fuel-based transport with electric cars and buses in particular, as well as other modes of transport such as non-fossil fuel ships and airplanes.

• Energy use in buildings, both commercial and residential, contributes around 17.5% of global emissions. These emissions can be reduced using steel to gradually replace and upgrade homes and buildings to make them more energy efficient.

In addition, by contributing to the electrification of energy systems, steel can also help reduce fugitive emissions from energy production (5.8%) and unallocated fuel combustion emissions (7.8%).

Steel made using metallurgical coal is an enabler and will play a role in reducing close to two-thirds of the world’s emissions. Trying to achieve energy transition without using steel made with coal would be like tying our hands behind our backs. Delivering energy transition, decarbonisation, and electrification in the required timeframes means that steel made using metallurgical coal is the most viable pathway.

A bright future for metallurgical coal

I like talking about my confidence in metallurgical coal’s bright future. After reading this piece, I hope that readers might have a better sense of why. 