Decarbonising iron and steel production is vital to limiting global warming to 1.5°C in line with the Paris Agreement. The steel sector alone is responsible for up to 9 per cent of global greenhouse gas (GHG) emissions.

As a leading supplier of iron ore, coal and fossil gas for the industry, Australia must play an active and responsible role in decarbonising the sector. Emissions from the use of these commodities in steel-making are enormous, with emissions from iron ore use alone approximately double Australia’s total domestic emissions from all sectors. Viable technological pathways for producing ‘green iron and steel’ exist and continue to evolve, but considerable investment and policy support are required to deploy these and put the industry on track to reach net-zero emissions before 2050.

The world remains overly dependent on carbon-intensive iron and steel production. But there are important signs of change and opportunities to accelerate it. Now is the time to invest in pathways to develop a green iron and steel industry. To continue with polluting steel manufacturing technologies, around 71 per cent of ageing conventional infrastructure (blast furnaces for iron-making) each need billion-dollar maintenance in this decade. Industry leaders in Sweden are instead investing in the fast-approaching low-emission economic future by building low- emission steel-making plants, with other countries following suit. Automotive manufacturers are increasing their appetite for green steel and this is putting pressure on steel manufacturers around the world.

Greening the steel supply chain presents Australia with both challenges and opportunities. Iron ore is Australia’s most valuable export commodity. This market, currently dominated by bulk shipments of largely unprocessed hematite ore, will change markedly in response to the demand for greener iron and steel. The contaminant levels of hematite ores make Australian hematite ores incompatible with available green steel technologies, creating a major risk to Australia’s economic future. Green steel compatible magnetite ores, previously seen as less economic to mine, will become important sources of high-grade iron-making feed until processing solutions for hematite ores emerge. Locations with magnetite and other suitable high-grade iron ores will become logical places to begin green iron manufacturing.

Greening iron and steel will trigger a restructure of steel-making. Asian economies that dominate steel-making and steel product manufacturing are likely to remain dominant steel producers. However, the current practice of producing iron for steel-making and steel products in the same location will be decoupled, as high-emission iron-making blast furnaces are phased out and replaced with technologies powered by renewable energy. Energy-intensive iron-making will need to be located closer to abundant iron ore, renewable energy and renewable hydrogen supplies. Australia remains well- placed to emerge as a major green iron producer, a multi-billion-dollar industry, starting with manufacturing green iron from magnetite iron ore processing and from hematite iron ore when technology allows.

Asia will largely determine the fate of iron and steel decarbonisation. Asian economies, led by China, dominate global steel output by carbon-intensive blast furnace-based production. Asian economies have pivoted towards green steel slowly but are increasing their commitments due to increasing decarbonisation and net-zero requirements. Key industry players have their own emissions reduction targets and are beginning to invest and transition their businesses to achieve net-zero goals.

Australia could forge a ‘green iron key’ to help unlock economic development and decarbonisation at home and in our region. Manufacturing green iron, a preferred import product for green steel manufacturing, is an optimal industry to develop to evolve and future-proof the iron ore industry. An ideal green iron plant produces less than 3 per cent of the emissions of a conventional blast furnace. Australia realising its green iron industry potential is critical to reducing the emissions of the iron and steel industry in our region and offers a clear emission reduction solution to our iron ore trading partners. This option also allows Asian steel producers to maintain their economic competitiveness in steel production, and steel industry jobs, by importing more suitable Australian green iron.

Asian steel producers are beginning to pursue Australian trade and investment. But successful partnerships are not guaranteed. Major Asian steel producers are pursuing green iron and steel value chains involving Australia, but they are also looking elsewhere. Australia’s ore challenges, and other industry headwinds, add to the need for a more active and unified national pursuit of green iron opportunities.

Australia must enhance domestic support to succeed in a green steel world. Australia’s green iron and steel success is not assured. Enabling priorities for this new industry include accelerating supply of renewable energy; new magnetite mining and developing new hematite processing technologies; developing a renewable hydrogen industry; and building renewable hydrogen-ready green iron plants. Co-locating assets would maximise efficiency. To deliver these, the government must provide a well- coordinated policy mix of carrots— that is, industry policy containing improved fiscal and regulatory support—and sticks, primarily clear and stronger real emissions reductions requirements on industry.

Australia and Asia’s success depends on effective cross-border cooperation. Australia’s iron ore and Asia’s steel industry have vast potential to collectively reduce emissions. To do this efficiently, partner countries must closely coordinate plans and policies to ensure success. The Australian Government and industry members must work closely alongside one another and with their Asian counterparts. Priorities include coordinating and expediting trade and investment plans, establishing industry standards, and enhancing research and development. Australian diplomats should also encourage Asian partners to take what could be market-transforming decisions, such as altering investment pipelines in favour of green steel-making capacity and making major public and private green steel purchase commitments.