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Rio strikes deal with Chinese partners to cut steel-making emissions

Steel building materials in China’s eastern city of Jiujiang. (Image: Shutterstock)

The world’s No. 2 producer of iron ore, Rio Tinto (ASX, LON:RIO), has inked a preliminary deal with two Chinese partners to develop new ways to cut carbon emissions along the steelmaking supply chain amid increasing pressure from stakeholders to make mining a more environmentally-friendly activity.

Rio said it will work with China’s largest steel producer, Baowu Steel Group, and Tsinghua University to address the steel industry’s carbon footprint and curb its “scope 3” emissions – those made by its customers.

Rio will work with China’s largest steel producer — Baowu Steel Group— and Tsinghua University on curbing the steel industry carbon footprint as well as its own “scope 3” emissions

“The materials we produce have an important role to play in the transition to a low carbon future and we are committed to partnering with our customers and others to find the most sustainable ways to produce, process and market them,” chief executive Jean-Sébastien Jacques said at a steel conference on Wednesday in Qingdao, China.

In March, the Anglo-Australian miner rejected proposals to set scope 3 emissions targets from its customers, saying they were primarily caused by its customers over which it had “very limited control.”

Rio Tinto’s change of heart follows a pledge in July by its rival, BHP, to spend $400 million over five years to reduce greenhouse gas emissions from its operations and mined commodities.

It also follows Australia’s Prime Minister’s challenge to China to do more to cut its emissions.

Asked if the move was a business decision or was made based on other considerations, Jacques said it was all about business. “It’s nothing more than that. We want to achieve the best supply chain for the steel industry. It’s not about ideology,” he said.

Highly polluting steel

The production of steel is one of the largest sources of carbon emissions, responsible for between 7% and 9% of global emissions, Rio said.

The traditional method of making iron and steel by smelting raw materials at extremely high temperatures has not changed much in more than 150 years. Large blast furnaces rely on metallurgical coal to reduce iron ore into liquid metal, which is then refined into steel.

The company noted the partnership will also look at emissions from distribution, an area where emissions can be quickly reduced by changing from ships using bunker fuel – heavy, carbon-intensive oil – to natural gas. Rio has reported that its scope 3 emissions, most of them from steel making, totalled 536 million tonnes of carbon dioxide equivalent gases last year, compared to 28.6 million tonnes across scope 1 and 2.