There is a strong need for the development of innovative processing methods to ensure a strong and competitive technological base for the steel industry in the future. The liquid oxysulfide phase in the iron-oxygen-sulfur system could function as a smelting medium for the production of metallic iron from oxidic and sulfidic ores. Potentially, the smelting process could be carried out at temperatures that are several hundred degrees below those in the blast furnace hearth and in steelmaking furnaces. The technology that could be based on oxysulfide smelting could have many advantages, some of which are high volumetric throughput, conservation of energy, and production of a very pure raw material for subsequent processing into steels. It is possible that the pure iron product might lead to completely new kind of steels, and eventually new methods of processing steels. A physic-chemical study will be undertaken of the thermodynamics and kinetics of reactions and processes that would be of generic importance in the development of possible methods for the bath reduction and smelting of iron ores in which the bath would be liquid oxysulfide phase in the Fe-O-S system.