A new deal for an electric furnace could massively reduce smelting emissions. 

Liberty Steel, owned by GFG Alliance, has signed a contract with Italian equipment company Danieli to build a new electric arc furnace at the Whyalla steelworks in South Australia. 

The $485 million deal aims to replace the old coke oven and blast furnace and end the role of coal in steel production at the site. 

The new furnace is part of GFG Alliance's plan to produce iron and steel without carbon emissions, paving the way for green steel and iron that could be exported globally. 

The modernisation is expected to reduce direct carbon emissions by around 90 per cent by 2025 and create over 1,000 permanent jobs in the city.

Sanjeev Gupta, the executive chairman of GFG Alliance, says; “This will put Whyalla firmly on the map, not only decarbonising Australia's steel industry but also feeding the world with green iron, decarbonising steel supply chains all over the world”. 

The electric arc furnace will have a capacity of 160 tonnes and increase steel production from 1 million tonnes to 1.5 million tonnes annually. Construction is set to take around two years, with work commencing within a year.

Mr Gupta added that if the electric furnace can be powered by renewable energy, Whyalla can produce iron and steel without any carbon emissions. 

“By decarbonising that, using hydrogen we set up the state to export green iron or green steel,” said South Australian Premier Peter Malinauskas.

Mr Gupta also revealed plans to establish a direct reduction iron plant to process magnetite ore from GFG’s nearby mine in the Middleback Ranges. The overall investment is expected to surpass $1 billion for both projects.

Industries such as car manufacturing and renewable energy infrastructure, such as wind farm towers, are at the forefront of wanting steel made with lower carbon emissions and are willing to pay more for it, according to Mr Gupta. 

“It's beginning to happen, and it will continue on,” he said.

Liberty Steel, one of the 215 highest carbon emitters under the federal government's safeguard mechanism scheme, needs new ways to cut emissions.

Mr Gupta has emphasised the need for the federal government to implement a carbon border adjustment mechanism to prevent carbon leakage to other countries, a problem that could disadvantage local manufacturers.

The investment in the electric arc furnace and associated infrastructure will be funded by Liberty Steel, which is also seeking a $50 million grant from the South Australian government, initially offered in 2016 when administrators KordaMentha were running the steelworks and trying to find a buyer after the collapse of its parent company, Arrium.