Western Australia could have a green steel industry by 2030 in case China turns away from Australia's iron ore, according to Alannah MacTiernan, the state's minister for the hydrogen industry.
MacTiernan told the Pilbara 2021 conference in Perth June 23 that amid "very complicated geopolitical positioning" occurring between China and Australia, "we are conscious" that the Asian giant — Australia's top iron ore customer — "might not always be so interested in us."
"It may well be that in five to 10 years' time that they have alternate [iron ore] sources from West Africa," MacTiernan said, adding that "we are very much focused on developing a green steel project" because "we need to be prepared" and "have a plan B."
Fortescue Metals Group Ltd. has talked of conducting trials to use renewable energy to convert iron ore to green iron in the first half of 2021 on its path to green steel. However, MacTiernan said the government has also sponsored the Minerals Research Institute of Western Australia to study green steel production.
The institute's work has suggested that, given the technological capability and the aspiration of the state's iron ore producers, producing direct reduced iron locally is "probably going to be our best bet, or looking at exporting a semi-finished product for overseas fabrication," MacTiernan said.
The minister said that a green steel manufacturing industry "looks to be achievable by 2030" in Western Australia's Pilbara region, where production by BHP Group, Fortescue, Rio Tinto Group and other, smaller players makes Australia the world's biggest iron ore exporter.
This can be done if power costs can be brought down to 4 Australian cents per kilowatt hour, MacTiernan said. The state government passed legislation in April 2020 to reform the Pilbara's "fragmented, high-cost and uncompetitive" electricity system and to create greater competition for industrial users to reduce power costs.
A spokesperson for the minister confirmed to S&P Global Market Intelligence that current power prices under the state's large business tariff are between 25 cents and 40 cents per kWh.
MacTiernan said government must also take on some commercial risk in the early stages of the state's hydrogen industry, citing her government investing A$2 million in Fortescue's A$32 million renewable hydrogen mobility project in the Pilbara.
The aim is to aggregate demand in the state to entice investment in large electrolyzers needed to split water into oxygen and hydrogen and capture the hydrogen that can be used in a raft of products such as feedstock in the production of fertilizer, as well as ammonia nitrate for explosives in the mining industry, the minster said.
Critical minerals bonus
Given Western Australia's plentiful sunshine per day on average, its abundant wind and the large expanses of land required for such projects, MacTiernan said the state should also involved in the production of electrolyzers, and all the equipment and membrane technology required.
The Pilbara contains many of the critical minerals needed for producing components used in electrolyzers, including lanthanides, which are "not found in great quantities elsewhere," along with platinum, nickel, copper and cobalt, she added.
To this end, her government is working with German, Japanese and South Korean companies, among others, to capitalize on that opportunity, the minister said.
MacTiernan's comments came the day before Perth-based Future Battery Industries CRC launched an Accenture report that said "there is potential demand for batteries to support 24/7 production of green hydrogen, but the size of this use case is not yet well understood given the immaturity of that industry."
Accenture's report said diversified battery industries could contribute A$7.4 billion annually to Australia's economy and support 34,700 jobs by 2030.
However, establishing diversified battery industries will need up to A$9 billion in additional capital on top of the up to A$14 billion in investment that will be necessary "even if Australia remains mining-focused in our battery industries. This is in addition to existing committed investments."
Australia's federal government also recently announced funding for hydrogen export hubs, and MacTiernan said Western Australia is "pitching hard" for two of those to be located in the Pilbara and Midwest regions.
However, the minster said the state first needs to see a minimum of 10 GW of renewably produced hydrogen before being able to export it, which is more likely to occur closer to 2030. She sees diesel replacement as one of the "most important" and earliest applications of hydrogen in the state.
