IEEFA Urges Australia to Accelerate Green Iron R&D as Global Competition Intensifies

A new IEEFA report warns that Australia's iron ore sector risks losing ground to Brazil, the Middle East and Africa in the emerging green iron market unless research and development enabling the use of Pilbara ore in hydrogen-based direct reduced iron steelmaking is accelerated. The Minerals Research Institute of Western Australia has found that a DRI-driven steel technology transition could leave Western Australia's iron ore industry in a precarious position if it does not adapt.

Australia leads the world in iron ore exports but faces a structural disadvantage in the green iron market: most Pilbara ore contains 56% to 62% iron, below the 67% minimum iron content typically required for DRI-based steelmaking. Brazil's Vale produces high-grade DR-grade ore that works directly in standard DRI-electric arc furnace operations, while Africa's Guinea is advancing the Simandou project targeting production of 200 million tonnes per year of 65% to 66% iron ore. The Minerals Research Institute of Western Australia identified that pathways involving intermediate iron products such as hot briquetted iron are the most prospective for Western Australia in a decarbonising steel market.

Major global steelmakers are already making location decisions that could bypass Australia. China Baowu is examining green iron sites in South America, Africa and the Middle East alongside Western Australia. Nippon Steel is evaluating Brazil as well as Australia for a US$700 million hydrogen-based steel investment. Emirates Steel Arkan, in partnership with JFE Steel and Itochu, plans to produce DRI in Abu Dhabi for export to Asia from 2025. Vale and H2 Green Steel have signed supply agreements for DR-grade iron ore for a DRI plant in Sweden, with Rio Tinto supplying pellets from Canadian — not Australian — operations.

IEEFA's report calls for Australia to redirect a portion of its planned green hydrogen production away from direct export — which is cost-prohibitive due to shipping losses — toward domestic processing of iron ore into green HBI for export. This would be significantly more energy-efficient and would leverage Australia's combined comparative advantages in renewables and iron ore. Rio Tinto, BHP and Fortescue are investigating DRI-compatible steelmaking technologies for Pilbara ore, and IEEFA urges governments to accelerate funding for these programmes. Fortescue already produces and exports magnetite at 67% iron content that meets DR-grade specifications, providing an existing pathway that can be scaled.

Key figure — US$700 million — Nippon Steel's potential investment in hydrogen-based green steel outside Japan, with Australia and Brazil under consideration as locations.