Green Steel. Integrated Modeling of Global Value and Supply Chain Configurations and Trade

Decarbonizing heavy industry is expected to reshape global value chains, especially in the iron and steel sector, where hydrogen- and electricity-based production routes create new trade patterns. A promising strategy is co-locating iron ore extraction and direct reduced iron (DRI) production at renewable-rich mining sites (e.g. Australia, Brazil), enabling export of hot-briquetted iron (HBI) as a green intermediate. However, we show that the most cost-efficient configurations may differ when broader factors are considered. Mining regions are often remote, with limited infrastructure, skilled labor, and access to finance. These constraints drive up EPC (Engineering, Procurement, Construction) costs and can undermine the viability of on-site DRI production. Preliminary results show an alternative three-step value chain: iron ore is extracted in traditional mining regions and shipped to sites that combine abundant renewables with industrial infrastructure and favorable financing (e.g. parts of the Middle East, U.S.). There, ore is processed into green iron and exported as HBI to established steelmaking hubs like Central Europe for final processing. We develop a spatially resolved linear techno-economic model using the PyPSA framework to jointly optimize the locations of iron ore mining and direct reduction of iron with green hydrogen, along with associated trade flows. The model includes region-specific renewable electricity and green hydrogen production, transport, capital, EPC, and steel production costs, minimizing total system costs while meeting steel demand. This research highlights the importance of spatial decoupling in green steel supply chains, provides an open-source model for assessing alternative configurations of the global hydrogen and steel trade, and contributes to a deeper understanding of how industrial value chains might evolve under climate policies. The modeling can be expanded to also consider geopolitical fragmentation and supply chain security.