Direct reduction (also known as sponge iron production) is a relatively new process for producing iron that is considered a key technology for the decarbonization of the steel industry. Unlike the conventional blast furnace process, direct reduction involves reducing iron ore directly into solid iron using natural gas, coal, or hydrogen, without first producing liquid pig iron.
Basic Principle and Products
In direct reduction, a reducing agent—usually natural gas, but increasingly hydrogen as well—reacts with the iron oxide in the ore. This produces a product with a 92–95% iron content, which is referred to as sponge iron, DRI (Direct Reduced Iron), or simply sponge iron. Unlike liquid pig iron from a blast furnace, DRI has a sponge-like, porous consistency and contains impurities. Therefore, it must be compacted or melted before being processed into crude steel.
Depending on the production temperature, a distinction is made between cold DRI (CDRI), hot DRI (HDRI), and hot-briquetted iron (HBI). While HDRI is processed immediately at the adjacent steel mill, CDRI is suitable for short transport distances and HBI for longer ones.
Market Trends and Technology
Global DRI production has been growing steadily. In 2023, 135.7 million metric tons (Mt) were produced worldwide—6.5% more than in 2022 and twice as much as in 2012. The leading producers in 2023 were India (49.3 Mt), Iran (33.4 Mt), and Russia (7.8 Mt).
A direct reduction plant consists of several main components:
- Reduction reactor as the core component
- Gas and Ore Feeding Systems
- Gas Cleaning and Treatment
- Product Processing and Cooling
Two methods dominate the market:
- The Midrex process, which operates at relatively low temperatures and pressures and accounts for about 56% of global DRI production.
- The EnergIron process from Tenova/Danieli.
Both types of facilities now produce up to 2.7 Mt per year. This is less than the output of traditional blast furnaces, which produce between 3.6 and 4 Mt of pig iron annually.
Environmental Issues and Challenges for H2
A key argument in favor of direct reduction is its significantly better carbon footprint compared to the traditional blast furnace process: Natural gas-powered DRI plants produce about 60% less CO₂ than the blast furnace process. When green hydrogen is used, emissions are reduced even further: H₂-DRI can cut emissions by up to 95%. In addition, the entire process requires less energy than conventional methods, as it eliminates the need for energy-intensive smelting. For this reason, it also generally produces fewer byproducts and pollutants.
According to the U.S. plant design firm Midrex, in 2023 approximately 68.5% of the DRI produced was natural gas-based and 31.5% was coal-based. Hydrogen-based DRI has so far only been used in pilot projects. The biggest hurdle to the use of hydrogen-based DRI is its high cost: investments of about one billion euros are required per million metric tons of annual capacity.
In addition, green hydrogen is currently still about three times as expensive as conventional hydrogen. Nevertheless, companies such as Stegra (formerly H2 Green Steel) in Sweden are demonstrating that the technology can be economically viable under favorable conditions. In Germany, too, numerous corporations are moving forward with projects involving the use of hydrogen, such as Salzgitter AG in Lower Saxony.
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