Australia’s iron ore sector is facing a historic turning point as China, its largest customer, accelerates the shift to greener steelmaking methods — a change that could undercut billions in export earnings but open the door to a new industry: green iron.
Iron ore remains the backbone of Australia’s resources economy, generating $124.5 billion in 2023–24, almost a fifth of total exports.
However, demand for its hematite-rich ore is under threat.
China, which sources 65 per cent of its iron ore imports from Western Australia, is ramping up the use of electric arc furnaces (EAFs), powered by renewable electricity and reliant on scrap and magnetite rather than hematite.
“Without adaptation, Western Australia’s iron-heavy Pilbara region could become a ‘wasteland’,” Fortescue chairman Andrew Forrest warned at the 2025 Financial Review Mining Summit.
Since early 2024, Beijing has halted permits for new coal-based blast furnaces while clearing projects for EAFs, supported by a decree mandating greater green energy use in steelmaking.
The country now has capacity to produce more than 160 million tonnes annually through EAFs.
However, the technology favours magnetite ores, giving suppliers in Brazil and Africa a competitive advantage.
Soroush Basirat, energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), says Australia must act quickly to shift its strategy.
“In Australia, producing green iron presents a multifaceted challenge — not just economic or technological but also geological,” he told Mine Australia.
Australia’s biggest opportunity lies in producing direct reduced iron (DRI) using green hydrogen, which strips oxygen from ore to create a low-carbon feedstock for steelmaking.
The Superpower Institute (TSI) estimates exports of 10 million tonnes of green iron a year by 2030 could generate up to $295 billion — nearly triple current iron ore export value.
Basirat stresses that only hydrogen from renewable sources can deliver truly sustainable outcomes: “While hydrogen has long played a role in direct reduction technologies — where part of the reducing gas is hydrogen derived from fossil gas — truly green iron depends on green hydrogen, produced from renewable sources.”
IEEFA’s lead steel analyst Simon Nicholas warned that rivals are already moving ahead.
“Green iron requires green hydrogen, so countries that already have low-carbon power grids as well as high-grade iron ore have an early advantage and will likely compete with Australia as early pioneers in truly green iron,” he said.
Nicholas noted South Australia is well-placed but risks losing momentum: “Unfortunately, South Australia is currently being led towards more gas and failing carbon capture and storage, which will see it miss out on the green iron opportunity that it was poised to lead.”
Despite potential windfalls, analysts argue more targeted policy and financial backing are required.
“We can’t expect markets to fix themselves,” said Ingrid Burfurd, carbon pricing and policy lead at TSI.
“We need policy leadership to back early projects, close the cost gap created by the lack of an international carbon price and help lay the foundations for a globally competitive industry.”
Innovative mapping tools are being developed to guide investment.
“The transition towards green steel disrupts traditional steel supply chains, creating both opportunities and challenges,” explained Marcus Haynes from Geoscience Australia, who leads the Economic Fairways Mapper project.
“The opportunity is to move further up the supply chain and increase the domestic value-added on our raw materials.
“The challenge is that change requires large investments which, to be successful, must remain competitive as technology and conditions change around them.”
Alongside modelling tools, the federal government announced a A$1 billion Green Iron Investment Fund in February to accelerate early-stage projects.
However, questions remain.
Deloitte Australia partner Georgine Roodenrys warned in a report: “At the current pace, it would take over 100 years to deploy the necessary renewables to replace 10 per cent of Asian steelmaking with green iron.
“Australia needs to accelerate the deployment of renewables and establish pragmatic policies that support both economic and environmental goals.”
Experts agree Australia’s mineral wealth, renewable potential and technical expertise put it in a strong position to capture what could be a once-in-a-generation export transformation.
However, pace is critical.
Basirat cautioned: “Without swift and large-scale action, Australia risks falling behind other nations that are already moving decisively to capture opportunities in this emerging green iron market.”
