It’s time for steelmakers to get serious about Canada’s green iron potential

The journey of global steel decarbonisation is in a sticky patch. Making iron with coal drives the bulk of the industry emissions — but the best developed alternative to date, green hydrogen-based ironmaking, is constrained by insufficient renewable energy and green hydrogen availability in many regions. An innovative way forward is emerging: a green iron value chain. 

Rather than shipping iron ore to steelmaking sites, this emerging value chain model involves producing green iron — made using green hydrogen — in regions with plentiful renewable energy and transporting it in briquetted form. This near-zero emissions iron, known as near-zero emissions hot briquetted iron (HBI), can be shipped to steel plants for further processing. Green iron trade enables a more competitive and geographically flexible approach to decarbonisation, by linking high renewable energy potential regions with steelmaking centres around the world. 

Green iron trade opens up a new supply chain opportunity to decarbonise global steel production. By shifting ironmaking to regions with strong renewable energy potential and green hydrogen feasibility, it allows steel production to stay in existing industrial centres. In this reconfigured value chain, Canada has potential to become one of the most promising suppliers of green iron globally. But whether this potential translates into real climate gains depends largely on the decisions of industry actors — in mining, energy generation, and iron and steelmaking.

According to recent research by Lund University, Canada has all the core ingredients to become a leading exporter of near-zero emissions or green HBI: high quality direct reduction (DR)-grade iron ore, strong renewable energy resources, robust infrastructure, and a skilled workforce. Shifting towards DR technology and producing green HBI could unlock critical emissions reductions across domestic and overseas steel production  — with Canada potentially contributing to eliminating up to 105 Mt of CO2 annually. The research also points out that this transition can create up to 14,000 new jobs and build a green iron industry valued at up to CAD 25 billion per year.

A strategic supply chain advantage

This is not just a transition opportunity for Canada — it also has added advantages. Canada’s estimated production costs for DR iron at USD 430–520 per tonne, sit at the lower end of the global range. For steelmakers in regions where renewable energy or green hydrogen supply is limited, access to green iron imports from Canada could help decarbonise operations without overloading domestic energy systems. With its green iron potential, Canada can play a crucial role in strengthening the emerging green iron value chain.

Canada also brings something equally important to the table: a strong foundation of trust and trade. It has long been a reliable supplier of raw materials critical to steelmaking. As demand grows for low-emissions inputs, this track record offers an opportunity to build deeper, climate-aligned trade relationships. Countries like Japan and those in the EU — which face limits on domestic renewable energy supply and will soon need to secure imports of green iron. Diplomatic platforms such as the G7 can play a catalytic role in removing trade barriers and enabling cooperation to scale this emerging value chain.

Steelmakers need to act on Canada’s green iron potential

Corporate actors are also critical in building out this green iron supply chain. ArcelorMittal is the world’s third largest steelmaker and the largest in Canada. It also has the largest iron ore mining capacity in the country. ArcelorMittal’s iron ore mines in Fire Lake and Monte Wright in the Quebec province produce DR grade ore, at an annual production capacity of 24 Mt. Unlike most of the iron ore mines ArcelorMittal owns or holds stakes in, these Canadian iron ore mining operations are export-oriented and already supply iron ore to the company’s ironmaking operations outside of Canada. 

The Labrador Trough in provinces of Quebec and Labrador, where the majority of Canada’s iron ore mines are located, benefits from high-capacity of hydropower, and strong potential for wind-generated renewable energy that could supplement the additional energy required for production of green hydrogen. With both RE-based green hydrogen potential and DR-grade iron ore at its disposal, ArcelorMittal is strategically positioned to produce green iron in Quebec, and export green iron surplus supply to its operations elsewhere, for example in Europe. 

One of Quebec’s legacy steelworks is ArcelorMittal Contrecoeur, currently operating a fossil gas-based DRI unit and one electric arc furnace (EAF). The site is yet to capitalise on the region’s renewable energy potential or explore expanding DRI capacity for producing green iron aimed at export markets. ArcelorMittal even had a plan to expand its DRI capacity in recent years. In 2021, ArcelorMittal Defasco in Ontario announced plans for a 2.5 Mt DRI plant, initially running on fossil gas. 

However, the project has since stalled and DRI operations are unlikely to start by the original 2028 target. The trend of prioritising EAF while delaying DRI is the direction that ArcelorMittal is taking in the EU. Yet Canada presents a different landscape: many of the constraints seen elsewhere can be overcome.  With the right alignment of stakeholders, the opportunity exists to decarbonise ironmaking in Canada — and to build a viable green iron export model.

Nippon Steel, the world’s fourth largest steelmaker — and growing with the historic U. S. Steel acquisition — is also well positioned to benefit from Canada’s green iron potential. The company recently acquired a 30% stake in the Kami iron ore project in Labrador, marking the company’s largest iron ore mine investment in recent years. The project is expected to produce up to nine million tonnes of DR-grade ore annually, suitable for low-emissions iron production.

With Nippon Steel now planning to build new EAF facilities in Japan, it will soon need to clarify where it intends to source iron to feed those EAFs. Yet the company has yet to indicate any plans to invest in green iron production anywhere — even as competitors move decisively in this direction. Nippon Steel is missing a major opportunity to invest further in a new green iron value chain in Canada, to meet its future needs.

What’s at stake

Canada’s green iron potential is real — and so are the stakes. As countries and companies work to decarbonise the steel sector, strategic decisions about where and how iron is made will shape the future of the industry. Steelmakers with integrated value chains and long-standing Canadian ties have the resources and positioning to act. Whether they choose to do this remains to be seen.