The production of HBI requires natural gas (or hydrogen) and high-grade iron ore. The steel raw materials market is concentrated in regions with cheap gas, while consumption is in regions with steel mills and EAFs.

The Middle East: Gas-Rich Production Hub

The Middle East (UAE, Bahrain, Saudi Arabia, Oman, Qatar) has abundant low-cost natural gas. The HBI market has many DRI plants in the region. These plants produce HBI for export. The iron ore is imported (from Brazil, Australia, Canada). The HBI is exported to Europe, Asia, and Africa. The region is the largest exporter.

North America: Self-Sufficient and Exporting

The US has abundant shale gas (cheap). The hot briquetted iron market has DRI plants in Texas, Louisiana, and Ohio. Some HBI is consumed domestically (by EAFs in the US and Canada). The surplus is exported to Europe and Asia. The US is also a major exporter of iron ore pellets (to other DRI plants). The region is a net exporter.

Russia and Ukraine: Potential Exports (Disrupted)

Russia had significant DRI/HBI capacity (using cheap gas). The direct reduced iron market notes that exports to Europe were disrupted by sanctions. Ukraine also had DRI production (using gas from Russia). The war has disrupted production. The region's future role is uncertain.

Europe: Consumer, Not Producer

Europe has high natural gas prices. The iron briquette market has limited DRI capacity (some in Germany, Sweden, Italy). Europe is a large importer of HBI from the Middle East, US, and Russia (pre-war). Europe also has many EAFs (which use HBI). The region's steelmakers are under pressure to decarbonize. Some are building DRI plants using hydrogen (by 2030).

Asia-Pacific: Growth in India and China

India has many DRI plants (using coal-based rotary kilns and gas-based shaft furnaces). The sponge iron market notes that India is the largest producer of DRI (but much is not briquetted). India also imports HBI (from the Middle East) for blending. China has some DRI capacity (using coal gasification). China is a large importer of HBI (to feed EAFs). The region's demand is growing.

South America: Brazil as Exporter (Iron Ore)

Brazil is a major exporter of iron ore (used in DRI). The steel raw materials market also has DRI plants in Brazil (using natural gas). The HBI is used domestically or exported. Brazil also imports HBI (from the Middle East) for coastal EAFs. The region is self-sufficient.

The Iron Ore Supply Chain

DRI requires high-grade iron ore (pellets). The hot briquetted iron market notes that the major pellet producers are: (1) Brazil (Vale), (2) Canada (Rio Tinto, Cleveland-Cliffs), (3) Sweden (LKAB), (4) USA (Cleveland-Cliffs). The pellets are shipped to DRI plants. The cost of pellets is a key factor. The pellet premium over standard iron ore is high.

The Role of Trade Agreements and Tariffs

HBI trade is subject to tariffs. The direct reduced iron market notes that the US has imposed tariffs on HBI from some countries. The EU has anti-dumping duties on HBI from certain regions. Trade agreements (e.g., US-Mexico-Canada) affect trade. The HBI market is not completely free.

The Impact of Shipping Costs (Freight)

Shipping HBI from the Middle East to Europe is cheaper than shipping from the US Gulf. The iron briquette market considers freight rates. The shipping cost is a significant portion of the delivered price. DRI plants are often located near deep-water ports. The importers also need deep-water ports.

The Emergence of "Green HBI" Trade

Green HBI (produced with hydrogen) may have different trade patterns. The sponge iron market expects that green HBI will be produced in regions with low-cost renewable electricity (e.g., Chile, Australia, Scandinavia). It will be exported to steelmaking regions. The trade may be similar to the current HBI trade, but with higher value.

The Future of HBI Trade

The hot briquetted iron market expects that HBI trade will grow as EAF steelmaking expands. New DRI plants are being built in gas-rich regions (Middle East, US). New EAFs are being built in steel-consuming regions (Europe, India, Southeast Asia). The trade flows are likely to increase. The steel raw materials market is global. And the HBI market continues to evolve, with production in gas-rich regions, consumption in steelmaking regions, and new green HBI projects emerging, shaping the future of the steel industry.

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