Australia’s role in the decarbonisation of the iron and steel value chain

Australia supplies 56% of the world’s iron ore, generating $138 billion annually. However, steel production contributes 6.7% of global emissions, and shifting supply chains threaten Australia’s export revenues. Decarbonising steel through green iron production could slash global emissions by 1 billion tonnes annually—double Australia’s domestic emissions—while securing economic resilience.

Australia’s iron ore resource and the implications of steel decarbonisation

Australia has 30% of the world’s demonstrated iron ore reserves, mostly hematite. Current production methods rely on blast furnaces, which are highly polluting. Transitioning to magnetite, which is more suitable for low-emission technologies like direct reduced iron (DRI), is critical. Investments in renewables and refining technologies could double export value to $250 billion annually.

State of play: Direct reduced iron and low-emission steelmaking

Global DRI production hit 135.7 Mt in 2023, projected to grow 30% by 2030. However, it mostly uses fossil fuels, with Middle Eastern nations dominating due to cheap methane. Australia’s high methane prices make green hydrogen essential for competitiveness. Increasing steel recycling via electric arc furnaces (EAFs) could reduce emissions significantly, though broader policy support is needed.

State of play: Green hydrogen

Global green hydrogen production remains limited, with only 1.75 GW of electrolyser capacity producing 185,000 tonnes annually. Australia’s renewable resources position it well for hydrogen production, but high capital costs and limited adoption remain challenges. Collaborating with Chinese manufacturers, who dominate low-cost electrolyser production, could accelerate hydrogen deployment. Policies should prioritise hydrogen use for green iron production.

North Asian steel industry: State of play and emissions reduction pathways

China, Japan, and South Korea are Australia’s top iron ore customers. China is reducing blast furnace reliance and expanding EAFs, driven by a growing carbon market. South Korea’s POSCO plans to invest $40 billion in hydrogen and steel, including $12 billion in Australian projects. Collaborative ventures like the Australasian Green Iron Corporation could align Australian and Asian decarbonisation efforts.

EU investments and public support

The EU leads in industrial decarbonisation through its emissions trading system (ETS), with carbon prices averaging €60-70 per tonne. Major subsidies support hydrogen-powered DRI plants, including Sweden’s world-first green steel facility. However, high hydrogen costs and reliance on local suppliers limit competitiveness. Australia’s renewable resources and access to Chinese manufacturing give it an advantage but require strategic public investment.

Western Australia’s green iron opportunities

Western Australia produces 98.9% of Australia’s iron ore, primarily hematite, but faces challenges like high methane prices and limited renewable energy infrastructure. Projects such as Rio Tinto’s BioIron and Fortescue’s green iron initiatives show promise. The Pilbara Energy Transition Plan could catalyse development, but further investments are needed to overcome cost and geographic barriers.

South Australia’s green iron opportunities

South Australia holds over 90% of its iron ore reserves in magnetite, ideal for low-emission steelmaking. Its renewable energy capacity and strategic port infrastructure position it as a green iron hub. Revitalising the Whyalla steelworks through public-private partnerships could unlock this potential. However, securing large-scale private investment is critical.

Queensland’s green iron opportunity

Queensland’s Energy and Jobs Plan supports renewable energy growth, critical for transitioning from coking coal dependency. Projects like Quinbrook’s green iron initiative highlight potential for diversifying the state’s economy. Investments in renewable energy and industrial infrastructure are necessary to position Queensland as a leader in low-emission iron production.

Green metals statecraft to catalyse Australia’s green iron industry

A National Green Iron and Steel Strategy, supported by $10-30 billion in public investment, is essential. Demand-side measures, such as contracts for difference and green metal standards, can create market certainty. Supply-side policies, including renewable energy precincts and production tax incentives, will bolster industry growth. International partnerships, particularly with North Asia, are critical for knowledge transfer and market integration. Accelerating renewable energy deployment and hydrogen infrastructure will underpin Australia’s green metals transformation.