en.Wedoany.com Reported - Vale plans to replace natural gas with biomethane in pellet production to address challenges posed by the upcoming implementation of the European Union's Carbon Border Adjustment Mechanism (CBAM).

Letícia Garcez, Vale's supply manager, stated that Vale is willing to act as an off-taker for biomethane, but Brazil's renewable natural gas market still needs to overcome regulatory and competitive barriers.

Garcez noted that Vale's vision is to start using biomethane "as quickly as possible," initially in small volumes and gradually expanding as the market matures. She pointed out that biomethane still faces economic hurdles, with a significant gap compared to natural gas. On the regulatory front, Garcez mentioned that certification requires addressing traceability issues, including discussions on biomethane transportation methods. She indicated that currently only truck transport is recognized in Brazil, but using trucks typically powered by diesel to transport biomethane does not significantly contribute to decarbonization.

In Vale's decarbonization strategy, natural gas and biomethane are used for industrial processes, while biofuels and electrification are applied in transportation. Natural gas is a major component of pellet variable costs, and improving its competitiveness is a core focus for Vale. Vale is gradually entering the free natural gas market, currently sourcing 100% of its natural gas from this market, with 80% under contract and 20% on the spot market. The company is testing natural gas contract models linked to Henry Hub and evaluating natural gas price hedging. In terms of natural gas market development, multipliers in short-term transportation tariffs still need improvement, the "Brazilianization" of natural gas prices requires further market liquidity, and the competitiveness agenda must focus on transmission and processing costs. Additionally, natural gas storage services are of practical significance to Vale, and Argentine natural gas imports require more robust coordination among all relevant parties.

Vale is still evaluating whether to use green hydrogen for its HBI (hot briquetted iron) project.

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