Australian executives warn of risk to green iron prospects from Middle East ramp-up

Australia's green iron industry is likely to be challenged by rapidly expanding iron reduction capacity in the Middle East, and in order to compete, it may have to quickly develop technology to process locally available ore to grades suitable for green steel production, according to Australian industry executives.

Most of Australia's world-leading iron ore production comes from Western Australia's Pilbara region. As most of that is too low-grade for use in green steel plants, local industry and government are focused on developing technologies to make the predominantly hematite ore suitable for green steel production via direct reduction iron, or DRI, processes.

However, experts have warned that time is short with increasing competition in the Middle East, which produced about 37.5% of global DRI as of November 2024, according to the World Steel Association.

"What's happened more recently is that there have been scores of these plants popping up in the Middle East. That's the unsaid disruption in the iron and steel value chain today," Don Johnston, non-executive director at Green Steel of WA Pty. Ltd., told a May 6 panel at the Energy and Mines Summit in Perth, Australia.

"It's absolutely unfathomable how rapidly the Middle East is expanding into iron reduction. They take the iron ore from Brazil, they direct reduce it and some [companies] like EMSTEEL Building Materials PJSC go all the way to a steel product in the Emirates, and some end up at DRI and ship it to other places that are starting to displace their blast furnaces with just electric arc furnaces for steelmaking."

The green iron industry is "reasonably immature" in Western Australia as the economics are still "challenging," Tijana LaBianca, group manager for green metal at Fortescue Ltd., told the panel.

"That rapid growth we're seeing in the Middle East presents an existential crisis to the Pilbara iron ore industry, and that is something the Australian government is becoming acutely aware of, and we're acutely aware of it," LaBianca said.

"Most of the green steel plants in production globally use ultra-high-grade iron ore with a very small amount of impurities, which can be put through a 'one-step' process that reduces the iron ore to produce iron. The challenge we have as an industry is that ultra-high-grade ore makes up less than 5% of the world's supply, which means there's not enough of it to decarbonize the whole [steel] industry, plus we have very little of it in Australia, so that's not going to be a solution that works for Pilbara."

A December 2024 report from the Chamber of Minerals and Energy of Western Australia (CME) named the Middle East, China, India, North America, and Brazil as "key potential [green iron] producers competing with Australia."

Western Australia could produce at least 4.5 million mt of green iron by 2030, ramping up to 218 million mt in 2050, which will be 14% of global supply. This could generate A$4 billion (US$2.6 billion) in export revenue by 2030 and A$170 billion in 2050, according to CME's report, which LaBianca said was done in collaboration with the state's major iron ore miners.

Sustainability advantage

The ironmaking process that liberates the oxygen from iron ore via reduction, most commonly using metallurgical coal, emits over 95% of emissions in steelmaking, which "therefore gives us the best decarbonization opportunity within that steel value chain," La Bianca said.

Therefore Australian industry needs to "find a technology that allows us to convert our ores -- be it Fortescue, BHP Group Ltd. or Rio Tinto Group -- into a green iron metal," the Fortescue executive said.

"Environmental sustainability" is where Australia "has a chance to compete against the Middle East," and European supply chain players appear willing to pay a premium for such DRI product, Johnston said.

Making steel using green techniques, including green iron, is "currently expensive," but costs will, in time, come down just as the price of solar panels has fallen to compete with coal-fired power in some countries, Don Smith, managing director of magnetite iron ore developer Tempest Minerals Ltd., told the panel.

Western Australia's government will be working "very closely" with the federal government to "grow the industry here," Katie Cook, director of the energy transition strategies division at Western Australia's Department of Jobs, Tourism, Science and Innovation, told the panel.

Western Australia's government has already supported the NeoSmelt ironmaking electric smelting furnace pilot plant, which Rio Tinto, BHP, and Australian steelmaker BlueScope Steel Ltd. are looking to start up as early as 2028. Fortescue is building a green iron project in its Green Energy Hub at Christmas Creek in the Pilbara that is set to produce more than 1,500 mt/year, with first production due this year.

The government also approved construction of a 450,000 mt/year green steel recycling mill on April 25 for Green Steel of WA, which is also planning a 2.5 million mt/year DRI plant in Western Australia due online by 2029.