Australia forges a future made from green steel

Australia has the minerals, renewable resources, infrastructure and incentives to support the global transition to green steel.

Steelmaking is a carbon-intensive business. It generates 2.8 gigatonnes of carbon dioxide (CO₂) emissions each year. That’s about 8% of total global emissions – more than any other heavy industry.

According to the International Energy Agency, emissions from steelmaking must be reduced by 50% by 2050 and then continue to fall, if the world is to meet its climate goals.

With emission-reduction goals looming, the prevalence of carbon pricing and customers demanding cleaner alternatives, steelmakers are stepping up efforts to transition to green steel.

Australia is a leading supplier of iron ore and coking coal that fuels traditional steelmaking. Now, we can help the global steel industry to shift to sustainable steelmaking.

Australia has plenty of the minerals – magnetite and hematite – and renewable energy resources to make green steel. Supporting infrastructure is in place and expanding. The Australian Government’s 2024–25 Budget includes A$18.1 million over six years from 2024–25 for Green Metals Foundational Incentives. The Budget also includes grants to develop technologies and facilities linked to green metals production and investments to scale up green hydrogen projects.

Western Australia leads the way

Three major green steel projects are underway in Western Australia, the home of traditional iron ore mining in Australia.

Green Steel of Western Australia (GSWA) has 2 large-scale low-emissions steel and iron projects. Both use green steelmaking technology from GSWA’s partner, Italian plant and equipment supplier Danieli.

The first is a A$400 million green steel recycling mill in Collie, the first of its kind in Western Australia. The mill will use an electric arc furnace powered by renewable energy to convert Western Australian scrap steel into rebar used in construction. The mill has the capacity to produce up to 450,000 TPA of green rebar and wire rod annually when it goes into production in 2026. Construction will start in late 2024.

The second project is a A$2.5 billion Direct Reduced Iron (DRI) plant near Geraldton. The plant will convert Western Australian iron ore into green DRI for export. GSWA will install Danieli’s ENERGIRON technology. This will allow the company to start operations on natural gas, then transition seamlessly to green hydrogen as supplies become available.

‘Smaller, more agile companies like us are well placed to be first movers leading Australia’s transition into green steel,’ says Azlan Ho, Green Steel of WA’s Managing Director.

‘We can make a massive carbon reduction impact using technologies that are being implemented around the world. This creates momentum and capability and leads to new jobs. When green hydrogen becomes lower cost at scale, we can eliminate small residual emissions with minor upgrades. Let’s start today rather than wait decades for the perfect solution.’

In a third project, Fortescue is developing a green ‘pit to product’ supply chain in the Pilbara region of Western Australia. The company is planning to build a US$50 million Green Iron Commercial Plant at Christmas Creek. It will include an electric smelting furnace. This will use renewable energy and green hydrogen reduction technology to produce high-purity green iron. Located at Fortescue’s Chichester Hub, the ironmaking technology will support Fortescue’s magnetite and haematite ores. Production is expected to start in 2025.

South Australia’s green steel strategy

South Australia is positioning to be a leader in decarbonised steelmaking. The South Australian Government’s Green Iron and Steel Strategy [PDF, 17 MB] sets out its plan to position South Australia as the partner of choice for decarbonised steelmaking. The state has abundant magnetite resources and extensive renewable energy resources. It is also making major investments in hydrogen production and sustainable water supply for industrial use.

In June 2024, the South Australian Government issued an expression of interest (EOI) [PDF, 13.5 MB] to jointly investigate and invest in building a green supply chain, to make green iron production a reality. The EOI closes on 1 October 2024.

Investment opportunities in green steel

Australia is in the early stages of developing facilities to process and/or add value to magnetite ore. Magnetite needs to be processed into a high-grade iron product that can be used in an electric arc furnace to make green steel.

Australia offers investment opportunities in:

• DRI facilities to develop green intermediate products for export or further domestic processing into green steel
• expanding magnetite mines with pelletising and value-add mid-stream processing
• new mini mills and electric arc furnaces.

Steelmakers will find plentiful raw materials for their projects in Australia. We have vast reserves of the magnetite ore (around 24,251 Mt of economic demonstrated resources) needed to make green steel. There are 6 active magnetite mines and 4 magnetite mining projects at the committed stage. Fortescue’s A$5.9 billion Iron Bridge magnetite mine will produce 2–4 Mt in 2024. The mine will ramp up to produce 22 Mt annually. There are also opportunities to invest in new magnetite mining projects.

Work on the other critical input – green hydrogen – is scaling up. Australia’s pipeline of hydrogen projects is the largest in the world, with up to A$300 billion in potential hydrogen investments (Source: Department of Climate Change, Energy, the Environment and Water, 2023).

The Australian Government is investing A$500 million to support the development of hydrogen hubs in regional Australia. When completed, the hubs will allow producers, users and exporters of hydrogen to work side by side to share infrastructure and expertise. Funding is being provided for hubs in New South Wales, Queensland, South Australia, Tasmania and Western Australia. Some hubs will be co-located next to mining projects and supporting infrastructure.

Global steelmakers are investing in green hydrogen projects in Australia. Energy giant Engie and South Korean steelmaker POSCO are studying potential sites for a project in the Pilbara. The project comprises wind and solar assets, a hydrogen electrolyser, large-scale storage and a pipeline that could deliver green hydrogen to POSCO’s planned Hot Briquetted Iron plant.

As the world’s leading iron exporter, Australia has a network of long-time trading partners. Australia has a 56% share of the Asian iron ore market – and green steel investors can tap into these established markets and buyers.

R&D opportunities with Australian researchers

Hematite makes up 96% of Australia’s iron ore exports. This type of ore, however, cannot be efficiently processedin electric arc furnaces into green steel. Australia is looking for research and development partners to explore new processing technologies for hematite.

Steelmakers can access the R&D Tax Incentive to offset some of the costs of eligible research and development in Australia.

Government support for green steel

The Australian Government’s Future Made in Australia plan identifies green metals (which includes green steel) as a priority sector for Australia’s investment in becoming a renewable energy superpower. The Government will drive growth in the sector by investing in skills and training, research and education. It will also provide financial incentives, regulatory changes and other enablers to help crowd in private investment.

Up to A$3 billion of the A$15 billion National Reconstruction Fund (NRF) has been set aside to finance renewables and low-emissions technologies. This includes funding for green steel and iron. There is also A$1 billion set aside for value-adding in resources.

Other sources of funding include:

• The Northern Australia Infrastructure Facility provides concessional loans for the development of infrastructure projects in northern Australia.
• The Australian Renewable Energy Agency (ARENA) administers funding programs to support pre-commercial innovation in the green transition.
• The Clean Energy Finance Corporation invests in renewable energy, energy efficiency and low-emissions technologies. It administers a A$300 million Advancing Hydrogen Fund.
• The Australian Government will introduce a new Hydrogen Production Tax Incentive. The incentive will provide a A$2 incentive per kilogram of renewable hydrogen produced between 2027–28 and 2039–40, for up to 10 years per project.

As part of its 2024–25 Budget, the Australian Government intends to fast-track the initial phase of the Guarantee of Origin scheme, currently focused on renewable hydrogen. In future, the scheme is set to be expanded to green metals and other low-emissions products.