[1/2] People stand at a cold rolling plant during a government-organised media tour to Baoshan Iron & Steel Co., Ltd. (Baosteel), a subsidiary of China Baowu Steel Group, in Shanghai, China September 16, 2022. REUTERS/Aly Song/File Photo

BEIJING, June 12 (Reuters) - Rio Tinto (RIO.AX) has signed a memorandum of understanding (MoU) with China Baowu, the world's biggest steelmaker by volume, to develop projects aimed at enabling lower grade ore to be used in low-carbon steelmaking, the miner said on Monday.

The demonstration projects include building a pilot-scale plant at one of Baowu's steel mills in China that will allow Direct Reduced Iron (DRI) steelmaking using low and medium grade ores.

"This MoU aims to address one of the biggest challenges faced by the industry - developing a low-carbon pathway for low-to-medium grade iron ores, which account for the vast majority of global iron ore supply," Rio Tinto chief commercial officer Alf Barrios said in a company statement.

China's Chalco is Rio's biggest shareholder and China is the biggest client for its iron ore.

Lower quality ores, which can already result in higher emissions because more rock has to be processed to produce the same amount of ore, typically cannot be used in DRI.

In contrast to traditional blast furnaces, DRI can use natural gas rather than more carbon-intensive coal as its energy source and should help to address concern on the part of investors and shareholders about the global warming impact of the steel and mining industries.

Steel production generates up to 9% of global emissions, according to the World Steel Association.

DRI requires feedstock in pellet form and Monday's statement said the companies would try to improve pelletisation technology for Australian ores and study production of low-carbon iron in Western Australia.

Rio and Baowu said last year that they would together invest $2 billion in a project in the Pilbara region of Western Australia.

They are also working together on the Simandou iron ore project in Guinea, as well as on expanding development of Baowu's HyCROF technology to reduce carbon dioxide emissions from the blast furnace process.

Baowu said last year the technology had lowered emissions in a trial at its Bayi steel mill by 21%, according to state media reports.

Reporting by Dominique Patton and Muyu Xu; editing by Barbara Lewis

Our Standards: The Thomson Reuters Trust Principles.

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