Decarbonisation has put iron ore exports at risk as Australia’s biggest customers increasingly look for green alternatives.
Australia is the world’s number one iron ore exporter and supplies half the world’s exports of iron ore and coking coal used to make steel. It is an industry valued at $120 billion per annum.
A new report by independent think tank Climate Energy Finance (CEF) warns Australia must act now as major North Asian partners including China decarbonise their steel industries.
Entitled Arc of Ambition, the report calls for a National Iron and Steel Decarbonisation Strategy, a Carbon Border Adjustment Mechanism, and investment in green onshore steelmaking as a national priority.
“This would position regional Australia in global iron and steel supply chains, as the steel sector irreversibly transitions away from highly polluting fossil fuel-based production,” the report said.
“Australia’s higher-impurity, lower-grade Pilbara ore – which is less readily suited to steel decarbonisation – has become increasingly exposed.”
However, there is a solution which presents a major opportunity for Australia under the federal government’s Future Made in Australia (FMIA) vision for green manufacturing.
It involves investing in Electric Arc Furnaces (EAF) that use electricity powered by renewables to produce steel at a fraction of the emissions of coal-fired blast furnaces.
This would create demand for future green iron production.
The report said Australia has scope to construct EAFs in Collie, Western Australia; Whyalla, South Australia; and greater Brisbane, Queensland, as soon as next year.
“This could unlock billions in investment, support large-scale new firmed renewable-energy capacity and create new regional employment opportunities,” the report said.
Green steel is key to tackling climate change. In 2024, steelmaking as a sector generated 9.4% of global CO₂ emissions – a carbon footprint surpassed only by China and the US’ national emissions.
“Steel decarbonisation is the world’s largest emissions-reduction opportunity outside electricity,” the report said.
Report co-author & CEF director, Tim Buckley, said steel has long been excused from accountability for its massive carbon pollution because it is considered too hard to abate.
“EAFs powered by renewable energy and fed with scrap steel and DRI are proof; that is an excuse, not a plan,” Buckley said.
UNSW Professor Liz Thurbon, director of the Green Energy Statecraft Project, said building entirely new industries depends on governments making strategic projects bankable.
“In practice, this means coordinating investment, infrastructure, finance, procurement, regulation and skills around a shared long-term national ambition – a Green Energy Statecraft approach,” Thurbon said.