The decarbonization of steel production is no longer a marginal environmental issue, but rather the central economic survival issue for industry. While the European emissions trading system is steadily increasing the costs of conventional blast furnaces, major buyers in the automotive industry are forcing supply chains to undergo a green transformation. The technology—in the form of hydrogen-based direct reduction—is ready for the market, but the bottleneck is increasingly shifting to raw material deposits. Whoever controls the strategic metal resources needed for this production transition will secure tomorrow's margins. Today, we take a look at Rio Tinto, Strategic Resources, and the BHP Group.
time to read: 5 minutes
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Author:
Armin Schulz
ISIN:
STRATEGIC RESOURCES INC | CA86277X4093 | TSXV: SR , BHP GROUP LTD. DL -_50 | AU000000BHP4 , RIO TINTO PLC LS-_10 | GB0007188757
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Author
Armin Schulz
Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.
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Rio Tinto: Between Green Steel and Harsh Market Realities
The mining giant is driving its decarbonization agenda forward with remarkable momentum. In June, together with the Chinese steel giant China Baowu, it achieved a breakthrough in the hydrogen-based direct reduction of medium-grade Pilbara ore. This milestone confirms, for the first time on an industrial scale, the use of this bulk raw material in low-emission processes. At the same time, promising projects are underway using HYFOR technology in Austria and the BioIron process, which combines biomass with microwave technology. The partnership with H2 Green Steel in Sweden also secures early access to a growing market for green steel.
The West African Simandou megaproject is gaining momentum and increasingly flooding the global market with high-quality ore. Shipments from Guinea have recently nearly doubled, causing the Australian-Brazilian duopoly to crumble. With Chinese steel demand weakening and warehouses full, prices are coming under pressure. Rio Tinto remains profitable thanks to its low production costs in the Pilbara, even in the event of significant price declines, but every USD 10 per tonne change has an impact of nearly USD 2.3 billion on EBITDA. The strategic response is capital discipline and cost efficiency.
While the iron ore division is under pressure from pricing, the copper business is becoming increasingly important. The ramp-up of the Oyu Tolgoi mine in Mongolia and the expansion at Kennecott are bringing the targeted million-tonne milestone closer. The 63% margin already matches that of iron ore, with rising production volumes achieved without significant additional investment. Instead of expensive acquisitions, the company is now looking to generate up to USD 10 billion from asset sales and efficiency gains. For investors with a long-term horizon, this offers the opportunity to participate in the group's transformation from a pure iron ore producer to a diversified commodities giant. The share is currently trading at around EUR 91.77.
Strategic Resources: Green Steel Made in Québec
The steel industry is undergoing a fundamental transformation toward electric arc furnaces, which operate more cleanly but require high-purity metallic feedstock such as pellets. Strategic Resources is addressing this bottleneck with the BlackRock project in Québec. The project includes an already permitted mine and a planned pelletizing plant with an annual capacity of 4 million tonnes at the deep-water port of Port Saguenay. The combination of low-cost hydropower, access to natural gas, and an ice-free port provides a lasting cost advantage. In addition, the ore contains vanadium and titanium, both critical minerals for the energy transition and defence sectors. A ten-year off-take agreement with Javelin Global Commodities underpins the commercial foundation.
Recent news further confirms progress. The company has submitted all required responses to environmental authorities on time to enable the capacity expansion from 1.5 to 4 million tonnes. A decision is expected in the coming months. At the same time, a memorandum of understanding was signed with Tyfast Energy to further process vanadium from the company's own mine into battery materials for heavy-duty commercial vehicles and defence applications. The listing on the Frankfurt Stock Exchange in April also opens the door to European investors seeking secure supply chains for critical raw materials.
The roadmap to production is clear. Following the expected approval in the second quarter, the final feasibility study and construction readiness will be completed by the end of the year. Financing, with Société Générale as the lead bank and a ratio of two-thirds debt to one-third equity, is on a solid footing. With construction costs of around CAD 500 million and government support, the timeline appears realistic. Construction is scheduled to begin in the summer of 2027, with full production expected in 2029. For those betting on the green transformation of the steel industry, this presents a promising investment opportunity. The share is currently trading at around CAD 0.30.
BHP Group: With Operational Projects Underway
The Australian mining group BHP is driving the decarbonization of steel production through two pilot projects, both still in their infancy. Together with Rio Tinto and BlueScope, the "NeoSmelt" electric smelting furnace is being tested in Kwinana, Australia. At the same time, the hydrogen-based "HyREX" process is being developed in South Korea with POSCO. Both pilot plants are expected to begin operations in 2028 at the earliest, although the feasibility studies for NeoSmelt are reportedly in their final stages. Commercial production is not expected before the 2030s. The company itself acknowledges that hydrogen-based technologies for iron ore will not be market-ready until the middle of the next decade at the earliest.
Currently, however, other news is overshadowing the company's green initiatives. In Port Hedland, the main export port for iron ore, around 200 electricians have voted to go on strike, which could begin within a few days. Although the company emphasizes that it has contingency plans in place, a prolonged outage of this critical infrastructure would have a noticeable impact on supply chains. At the same time, a report by The Guardian is causing a stir, alleging that BHP has quietly shelved a major renewable energy project in the Pilbara. The 500-megawatt project could have significantly reduced Scope 3 emissions but was not implemented despite internal support.
This paints a mixed picture for investors. While the copper business is increasingly becoming a pillar of earnings and the core operations are performing solidly, recent developments show that the green transition faces real hurdles. The shift away from projects with high social value, coupled with labour disputes in the supply chain, could be interpreted as warning signs. The balance sheet is robust enough to handle both the decarbonization projects and the ongoing challenges. The coming months will show whether the group can reconcile its strategic ambitions with operational reality. Currently, one share costs around EUR 39.725.
The green steel transformation is reaching a critical turning point—yet the paths taken by the raw materials giants could not be more different. Rio Tinto impresses with technological milestones and a clear diversification strategy toward copper, while Strategic Resources stands out as a hidden gem in Québec, benefiting from low-cost energy and government support. The BHP Group, on the other hand, is struggling with operational challenges and a sluggish transformation, which is pushing its ambitious pilot projects further into the distance. While some are actively shaping the change, others risk falling behind. The coming years will ultimately determine the strategic winners of this development.
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