Brazil, Middle East and Africa Challenge Australia's Position in Green Iron Market

Australia's iron ore sector faces growing competition in the emerging green iron market from Brazil, the Middle East and Africa, which hold higher-grade ore deposits better suited to hydrogen-based direct reduced iron steelmaking processes. Most Pilbara iron ore, at 56% to 62% iron content, falls below the 67% threshold currently required for DRI technology, leaving Australia exposed as the global steel industry accelerates its shift away from coal-fuelled blast furnaces.

South Korean steelmaker POSCO is considering a US$40 billion investment in Australia with US$28 billion earmarked for green hydrogen and US$12 billion for green hot briquetted iron production and export. Nippon Steel is evaluating a US$700 million investment in hydrogen-based green steel, considering both Australia and Brazil as locations. China Baowu Group, the world's largest steelmaker, is weighing green iron projects in Western Australia alongside alternatives in South America, Africa and the Middle East, including an agreement with Aramco and Saudi Arabia's Public Investment Fund for a DRI plant in Saudi Arabia. The Minerals Research Institute of Western Australia found that pathways involving intermediate iron products such as hot briquetted iron are the most prospective for Western Australia.

Brazil holds a structural advantage because its major iron ore miner Vale produces direct reduction-grade ore that can be used directly in standard DRI-electric arc furnace steelmaking without additional processing steps needed for blast furnace-grade ore. In May 2023, Vale signed a memorandum of understanding with GravitHy to evaluate a hydrogen-based DRI plant in France targeting production from 2027. H2 Green Steel, aiming for green steel production from 2025, has secured multi-year supply agreements with Vale and Rio Tinto — with Rio supplying pellets from Canadian, not Australian, operations. Guinea's Simandou iron ore project, led by Rio Tinto and Chinese partners, is expected to produce 200 million tonnes per year of 65% to 66% iron ore by end of the decade.

Australian miners including Rio Tinto, BHP and Fortescue are investigating technology solutions to enable use of Pilbara hematite in DRI-based processes, while Fortescue is already producing and shipping magnetite at 67% iron content meeting DR-grade. The Minerals Research Institute of Western Australia has warned that without technology acceleration, Australian iron ore could be in a precarious position if the steel technology transition speeds up. IEEFA recommends refocusing green hydrogen projects toward domestic industrial use to produce value-added green iron exports, rather than pursuing direct hydrogen export, and calls for urgent public and private investment in DRI-compatible iron ore research and development.

Key figure — US$40 billion — POSCO's potential investment in Australia, with US$28 billion for green hydrogen and US$12 billion for green hot briquetted iron production.