Key findings

While Australian mining remains cost-competitive, a range of emerging challenges in the iron ore market could affect the long-term prosperity of the country’s largest export sector. Australian iron ore miners appear to be facing new pressures that are significantly affecting their negotiating power, particularly with Chinese buyers. Australia’s major iron ore miners are likely to continue business as usual in the immediate term, supported by billions of dollars of infrastructure in the Pilbara region and significant economies of scale. These factors shield them from fierce cost competition, positioning them to potentially be the last producers to fall as market dynamics shift.

However, the potential pressure from new entrants, such as the massive Simandou project in Guinea, should not be overlooked. While some analysts believe this project will have little impact on low-cost Australian producers, any additional supply is likely to push higher-cost producers out of the market. Australian miners emphasise that the global steel industry is growing and hope that declining demand in China—which accounts for about 85% of Australian exports—will be offset by increases in South-east Asia and India. However, India is already the world’s fourth-largest iron ore producer and is largely self-sufficient, with the potential to export to China when prices are high. It remains unclear how much new Indian steel plants will rely on imports, and major competitors like Vale are also seeking to expand in these emerging markets, leaving the extent of the demand offset as an open question.

The sector is expected to face a long-term decline in revenue due to lower prices. The Australian government forecasts that iron ore export earnings could fall from AU$117 billion in FY2024-25 to AU$81 billion in FY2029-30. This declining trend was reflected in the federal budget FY2025-26 and Commonwealth Bank projections, which provided a steeper outlook. Even if the mining sector is not at immediate risk, it is approaching the end of a boom after decades of exceptionally high demand growth from China.

Challenges for Australia’s iron ore sector

The global iron ore trade is evolving rapidly, and Australia is vulnerable to shifts driven by China. China’s steel demand has been in decline throughout this decade, with 2025 recording its lowest production in seven years. A series of challenges point to intensified headwinds, including a property sector crisis and the slowest economic growth in approximately 35 years. Market restructuring in China is another major factor, characterised by centralised buying through the China Mineral Resources Group, stronger bargaining power against suppliers, and a gradual shift toward yuan-based trade settlement. There has also been a noted ban on BHP’s iron ore.

The steel industry is undergoing a transformation marked by overcapacity and a shift toward rising scrap-based steel production using electric arc furnaces. Early-stage hydrogen steelmaking adoption is beginning, while supply-side disruptions emerge from the diversification away from Australian supply and the emergence of large-scale new supply like Simandou. Furthermore, Australia is struggling with the degradation of iron ore quality and declining average ore grades. Geopolitical factors, including China–US tariff tensions and conflicts in the Middle East and Ukraine, further impact the global economy and supply chain certainty.

China is actively moving towards using hydrogen in steelmaking, evidenced by the opening of Baosteel’s first 1 million tonne direct reduced iron (DRI) facility. As the world’s lowest-cost producer of renewable hydrogen, China is well positioned to scale green iron production using high-grade imports from Brazil and West Africa. Additionally, China’s emissions trading system is expected to introduce absolute emissions caps by 2027, replacing intensity-based approaches and pressuring steelmakers to seek higher-grade raw materials and lower-emissions pathways. As the market tightens, Australian miners’ negotiating power weakens, and customer loyalty can no longer be taken for granted.

Green iron opportunity

Australia supplies about 52% of the global seaborne iron ore market but cannot afford to ignore the emerging market for high-grade ores and green iron. Green iron requires a fully integrated value chain to unlock new export markets and enable domestic ironmaking. Although high-grade iron ore currently represents only 5% of the total market, its growth rate is significant as steelmakers shift to low-emissions direct reduction technology. By 2035, a supply gap of about 70 million tonnes per year is expected, which could restrict global DRI production. If Australia acts quickly, it can position itself to supply this market within the next decade before more established competitors make it harder for new entrants to gain a foothold.

Australia is increasingly shifting toward innovative ironmaking solutions aimed at enabling the use of lower-grade Pilbara ores. While these pathways are currently niche, they hold the potential to evolve into mainstream ironmaking routes if successfully scaled. Studies estimate Australia’s green iron export market could be worth about AU$300 billion—almost triple its projected iron ore exports. Processing ore into iron can add significant value and allows Australia to capture “green premiums” not available to iron ore processed using gas. Regional opportunities, such as the expansion of scrap-EAF capacity in South-east Asia and Oman’s ambition to become a green industrial hub, provide pathways for future hot briquetted iron exports. Australia’s iron ore industry must take an active role in shaping these new markets driven by decarbonisation rather than simply following market trends fuelled by polluting technologies. The time to pivot is now.