Russian Iron Ore Giant Pushes Greener Steel Before Potential IPO

(Bloomberg) -- Russia’s biggest iron ore producer, part owned by billionaire Alisher Usmanov, is pushing its green steelmaking credentials as it weighs an initial public offering that could value the company at $20 billion.

While ranked in the top 10 for iron ore output, Metalloinvest Holding Co. boasts more reserves than BHP Group, Rio Tinto Group and Fortescue Metals Group Ltd. combined. But what sets the closely held miner and steelmaker apart is its leading position in the supply of a type of iron that helps electric-arc plants produce steel with a fraction of the carbon dioxide emitted by traditional blast furnaces.

“Our strategy is based on developing a segment of premium products that will allow a reduction in the carbon footprint,” Chief Executive Officer Nazim Efendiev said in interview from Moscow. 

While the coal-burning steel industry is responsible for about 7% of global carbon emissions, the hot-briquetted iron, or HBI, produced by Metalloinvest makes steelmaking a less polluting process. Already the largest producer of HBI -- a form of direct reduced iron -- the company is planning two new projects in central Russia that will almost double its annual capacity to 9 million tons, Efendiev said. One of those plants will be a joint-venture with Usmanov’s USM, which controls Metalloinvest.

“Demand is growing, including from China, which is reforming its steel industry in an effort to reduce emissions,” the CEO said. It’s also happening in Europe, Metalloinvest’s biggest export market, he said.

The company is also expanding its output of direct reduction grade pellets, used to make DRI. It plans to add output of as much as 10 million tons in addition to the 12 million tons of pellets already consumed by Metalloinvest units, the CEO said.

The company also hopes to use hydrogen, instead of natural gas, in pilot DRI projects in a couple of years, just in time for the European Union’s implementation of cross-border carbon regulations, Efendiev said. In June, the company signed an agreement with Rosatom Corp. and Air Liquide to test the technology.

The expansions will see annual investments increase to as much as $1 billion from next year. While iron ore is likely to remain at $150 to $180 a ton for about a year before declining, Metalloinvest’s premium products makes its business sustainable, the CEO said.

The company expects to seek a valuation of about $20 billion in an IPO, potentially next year, according to people familiar with the situation, asking not to be named as the matter is private. No decision has been made on whether to proceed with an IPO, said Efendiev, who declined to comment further. Metalloinvest has already started talks with banks as it weighs an IPO, people familiar said in July.

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