Direct Reduced Iron

Iron inside ore mined from the ground is chemically bound to oxygen. To get usable iron, you must first strip this oxygen away. This process is called reduction.

In a traditional blast furnace, burning coke creates hot gases that strip oxygen from the iron ore. The reduced iron melts and pools at the bottom as liquid metal, which is later refined into steel. When that molten iron cools and hardens, it becomes carbon-rich pig iron. In other words, stripping oxygen and melting the metal happen back-to-back inside the same furnace. But those two steps do not actually have to happen together.

Oxygen can detach from iron ore well below its melting point. Ore pellets are loaded from the top into a tall, shaft-like furnace, while hot gases are pumped upward from the bottom. As the rising gas carries the oxygen away, the chunks remain solid, leaving behind pure iron. Their overall shape and size barely change at all.

Tiny pores are left behind where the oxygen used to sit. Because it looks like a porous sponge, it is often called sponge iron. A kitchen sponge bounces back when squeezed, but this chunk is hard, solid metal. Direct reduced iron stays solid because only the oxygen is removed without melting, whereas pig iron is solidified molten iron from a blast furnace—their journeys are completely different right from the start.

Iron made this way is not steel quite yet. Traces of rock and leftover oxygen linger inside its pores, and its carbon content still needs adjusting, so it must be melted down and refined into sheets or bars. Furthermore, with so many open pores, it can easily re-oxidize in open air; to ship it overseas, it is often pressed while hot into dense briquettes. The actual melting is handled downstream by an electric arc furnace.

When people hear "electric arc furnace," they usually think of recycled scrap from car junkyards. But scrap is not the only thing that feeds an electric furnace. Another option is reducing raw ore with gas or hydrogen into solid iron, then melting that iron in the electric furnace. In short, the starting material is ore, but the melting happens in an electric furnace.

This makes it fundamentally different from scrap metal. Scrap is discarded steel that was already used, while direct reduced iron is fresh iron newly stripped of its oxygen. The starting line—recycled steel versus raw mined ore—is what separates them.

Regions that lack abundant scrap but have cheap natural gas for reduction often take this route. Countries with centuries of industrial history have mountains of scrap, but fast-developing regions have not had the time to accumulate it. What separates the two paths is not modern versus outdated technology, but the local availability of raw materials and fuel.

The substance that carries away oxygen is called a reducing agent. Today, the most common reducing agent is reformed natural gas, a mixture of carbon monoxide and hydrogen. Coal can also be used, though that comes with a different emissions footprint.

This is why direct reduction should not be confused with hydrogen steelmaking. Direct reduction refers to any method of stripping oxygen without melting, while so-called hydrogen steelmaking is a branch that switches the reducing agent to hydrogen. Injecting small amounts of hydrogen into conventional blast furnaces is sometimes referred to by the same name. Even the natural gas used today contains hydrogen, meaning part of the oxygen already leaves as clean water vapor. The more you shift the reducing agent toward hydrogen, the less carbon dioxide escapes into the air.

In 2021, sponge iron reduced with fossil-free hydrogen was made in Sweden, and the first steel rolled from it was delivered to the Volvo Group. As of this writing, commercial-scale facilities operating continuously remain rare. The OECD notes that several low-emission steel projects worldwide face delays.

In terms of carbon emissions, this process sits right in the middle. Making one ton of crude steel emits about 2.34 tons of CO2 through the traditional blast furnace route from ore, and about 0.69 tons through the scrap-fed electric furnace route. Direct reduction lands between them at 1.47 tons (based on 2024 operational data). Keep in mind that these figures represent voluntary reporting from World Steel Association members, covering just over half of global steel output.