Green Iron opportunities in Australia

1. Introduction

Australia has the ambition to become a global hub for green iron1 production and trade. Its abundant resources of iron ore, in combination with favourable conditions for renewable energy production and a supportive policy environment are important assets underlying this ambition. The way to realise this green iron ambition is currently a hot topic among policymakers, think tanks, universities and civil society organisations as well as the private sector, with a plethora of consultations, papers, initiatives and conferences delivered or planned.

Australia’s ambitions take place against the background of global developments in green iron markets. With a view to developing cost-effective steel decarbonisation pathways, various countries and companies along the steel value chain are exploring options to decouple the iron and steel making process geographically, with green iron production concentrated in regions that offer the most favourable circumstances. Low-carbon iron products would subsequently be exported to steel producing economies. Comparative advantage in a decarbonised global economy would play a significantly increased role in the steel value chain. While this rapidly evolving green iron market holds significant potential to transform the steel industry and advance global decarbonisation efforts, current developments in this area remain underexplored and poorly understood, posing challenges to both industry stakeholders and policymakers. In particular, the potential misalignment between government strategies across diverse geographies aimed at supporting and attracting green iron production can lead to inefficiencies, contradictory policies, and heightened policy competition, with possible repercussions for both developed and developing economies.

This case study on green iron developments in Australia is part of a wider OECD green iron project as part of the Programme of Work and Budget of the OECD Steel Committee, that aims to help better understand developments in green iron markets and provide a platform for international discussion and cooperation on the topic. The case study reviews Australian green iron developments against the background of how global green iron markets are taking shape and the positioning of firms and jurisdictions across the steel value chain. The paper analyses green iron developments from the perspective of four key drivers: renewable energy availability, raw material availability, demand considerations and policy settings (see Annex B for a comprehensive explanation of the approach to the study). As such, the case study aims to provide both a benchmarking of Australian policy and company strategies, as well as an assessment of how developments in Australia link to the broader global green iron context and its drivers. The case study builds on wider OECD work on industrial decarbonisation in Australia, such as the 2023 OECD Economic Survey on Australia (OECD, 2023[1]), an OECD study on the Pilbara (OECD, 2023[2]) and wider OECD industrial decarbonisation analysis (OECD, 2023[3]).

The case study was executed on the basis of extensive data analysis, interviews with over 100 Australian stakeholders, a structured questionnaire and a mission to Australia late November 2024 (see Annex A). The paper first discusses developments in green iron markets from the perspective of Australia and thereafter assesses these through the lens of the four drivers.

Why is this important?

1. The steel industry, responsible for over 8% of global CO2 emissions, must undergo significant transformation to meet climate targets set by the Paris Agreement (IEA, 2023[4]). Although progress in incremental step change in emissions reduction and energy efficiency has been made, these efforts remain insufficient for full decarbonisation. A major shift is required toward greener inputs, primarily in iron production, which makes up for a significant share in steel industry CO₂ emissions. Transitioning away from metallurgical coal-based reduction is also critical to mitigating coal mine methane emissions in the steel value chain, an often overlooked aspect of the embedded emissions in steel production. The investigation into hydrogen-based direct reduced iron (DRI) and hot briquetted iron (HBI) has expanded rapidly, with many companies expressing an interest in producing H2-DRI/HBI, however final investment decisions and capital flows into project proposals remain slow. OECD analysis shows that nearly 60% of steel companies now include hydrogen-based DRI in their decarbonisation roadmaps, highlighting the growing focus on green ironmaking technologies (OECD, 2025[5]).

Figure 1. Emissions across the steelmaking value chain in BF-BOF route

Source: MRIWA, retrieved from (Pollard and Buckley, 2024[6]).

2. As low-emission factors of production become increasingly representative of the overall costs of iron in the steel value chain, the question arises of where such production can best be located. Instead of co-locating green iron and steel production, green iron production may be located where circumstances are most favourable after which it could be exported to steel plants elsewhere. This could entail a significant restructuring of the steel value chain and offer opportunities for countries such as Australia. For other countries, it raises the question on advantages and disadvantages of relying on green iron imports. This makes a better understanding of developments in green iron production not only important from an economic but also a political perspective.

Note

← 1.  “Green iron" refers to iron production achieved through reduction/beneficiation methods (mainly H2 -reduced DRI/HBI) that utilise renewable energy resources as main primary input.