Shanxi Taihang Mining Co Ltd will become China's first company to use coke oven gas as an alternative to natural gas to get reduced iron in industrial production after striking a contract to import Iranian technology on Monday.

Under its contract with Mines and Metals Engineering (MME) GmbH, owned by the Iranian government and based in Duesseldorf, Germany, Shanxi Taihang Mining will use world-leading processing technology and equipment to lift its iron productivity and reduce emissions.

Technically termed as direct-reduced iron process, the technology can raise the purity of iron to 98 percent, according to Weng Yuqing, chief expert of China's Ministry of Science and Technology.

Traditional blast furnace iron-making, which generates 80 percent of China's total iron and steel output, however, only results in an iron purity of 60 to 70 percent.

"The collaboration will allow Chinese companies to use coke oven gas for the first time to directly reduce iron for industrial purpose," said Weng, also an academician with the Chinese Academy of Engineering.

He said the technology is suitable for China's metallurgical industry and fits the country's vision to build an energy-efficient society with low carbon dioxide emission.

According to a Shanxi Taihang Mining statement, the direct-reduced iron project with an annual capacity of 300,000 tons of iron is situated in the Longquan Industrial Innovation Demonstration Park of Zuoquan County, Jinzhong city of north China's Shanxi province.

The park with a total planned investment of 15 billion yuan has used 2.3 billion yuan in its first phase of construction, which also includes the renovation and expansion of a colliery with a production capacity of 1.5 million tons, a 2.1 million-tonne coal washing project and a 1-million-ton coking project.

All these projects will be fully operational successively from 2014 to 2015. The technological solution is MME GmbH's up-to-date innovation and patented in Germany, according to sources with Taihang Mining. Neither side revealed the amount of the transaction.