Posco said Tuesday that it will conduct a feasibility study with Brazil’s largest raw material supplier, Vale, for the possible production of hot briquette iron as part of the steel giant’s efforts to reduce its carbon footprint. 

HBI, which is created by reducing the iron ore with natural gas, is a relatively new product that has been recently introduced to be used as a pre-material in blast furnaces or electric arc furnaces. A low-carbon HBI manufacturing plant emits less carbon dioxide by using hydrogen as a reducing agent.

Through the agreement, the two companies plan to review the feasibility of a new HBI plant, related investments, including materials costs, and discuss emissions-reducing measures for the production. 

Posco said the business review would be completed by the end of this year, which could lead to a new investment plan. 

The latest agreement comes after the two firms signed an agreement in November last year to develop decarbonization solutions in steel production. Since then, they have been promoting joint research on the application of new raw materials such as iron ore briquette.

“We are stretching our area of collaboration with Vale to HBI production. We will take the lead in taking action for carbon neutrality with raw materials supplier Vale, and seek stable measures to secure HBI,” said Lee Joo-tae, Posco’s head of purchasing and investment division.

The two firms have maintained close ties for more than 40 years, with Vale supplying key materials like iron ore to Posco, the steel giant, for decades. 

Meanwhile, on Monday, Posco said Kobrasco, a joint venture firm established in 1996 with Vale, has produced an accumulated 100 million metric tons of iron ore pellets at its Vitoria plant in Brazil.