Mitsui & Co., Rio Tinto team to clean up raw material supply chain

With EU carbon tax on way, partners go to work in emission-intensive sectors

Mitsui & Co. and Rio Tinto team up to accelerate decarbonization across the raw material supply chain.

TOKYO -- Japanese trading house Mitsui & Co. and Anglo-Australian miner Rio Tinto have teamed up to accelerate the decarbonization of the raw material supply chain as downstream industries come under pressure from end users, investors and governments.

The partners in December signed a Memorandum of Understanding to work together to reduce carbon emissions in steelmaking, supply ammonia and hydrogen to Rio Tinto, develop new forms of renewable energy, and make other strides toward a sustainable future.

The mining giant aims to halve carbon emissions by 2030 from their 2018 level and to achieve net-zero emissions by 2050. Addressing climate change "is the center for the company's future," CEO Jakob Stausholm said in an interview with Nikkei Asia in September.

One key area is iron and steel production. Rio Tinto accounts for roughly 20% of global seaborne iron ore trade. Its customers and end users, such as steel mills and carmakers, are now facing increasing pressure from investors and governments to decarbonize.

In a recent move, the European Union in December reached an agreement on the Carbon Border Adjustment Mechanism (CBAM), which levies a carbon tax on goods that are exported to the European bloc from energy-intensive industries. Collaboration beyond industries is becoming more important for companies to be competitive in global markets.

The steel industry is considered to be one of the most polluting. "The process of producing steel will have to change if we want to go to a zero-carbon economy," Stausholm said. "We need to work very closely with the steel manufacturers on how we can do things in the most efficient manner. ... It feels like everyone has got part of the solution, and together we have to find a full solution."

Rio Tinto CEO Jakob Stausholm says that addressing climate change "is the center for the company's future." (Photo by Keiichiro Sato)

The iron ore business accounts for 60% of Rio Tinto's revenue, followed by aluminum (19%) and copper (12%), according to QUICK-FactSet.

For both companies, it is the first time to enter into such a comprehensive deal with a single partner.

Mitsui & Co. says it can offer solutions from companies in which it holds stakes. The trading house partly owns U.K.-based Binding Solutions Limited, which has a technology that agglomerates iron ore without any heat and emits nearly zero carbon dioxide. In traditional steelmaking, iron ore fines are agglomerated at very high temperatures before being put into blast furnaces to be transformed into steel, a process that emits high levels of carbon dioxide.

The trader hopes to help Rio Tinto reduce its scope-3 emissions with such technologies.

Mitsui & Co. also intends to supply Rio Tinto with alternative fuels such as hydrogen. Currently, making iron uses the carbon of metrological coal to remove oxygen from iron ore. But the oxygen combines with carbon to create carbon dioxide. If hydrogen were to replace met coal, it would combine with the oxygen to produce only water.

"It is important for the industry's leading players such as Rio Tinto and Mitsui to show the world that we are exploring ways to decarbonize," said a representative at Mitsui & Co. "That is how we can inspire other companies to make a difference in the industry."