But China is getting serious about achieving net zero nationally before 2060<\/a> and 15% of its carbon emissions come from steel. This puts Australia at a fork in the road. It can risk losing its main buyer by continuing to sell its raw iron ore, which is potentially of lesser use in a future of lower demand and fewer blast furnaces in China. Or, it could harness its mineral reserves and renewable energy potential to produce \u201cgreen iron\u201d, a form of the metal processed using renewables that could be vital<\/a> to near-zero emissions steelmaking, in China and beyond.<\/p>\n\n\n\n That 60% margin is not only unsustainable as the market shifts away from \u201cdig and ship\u201d to more sophisticated solutions. China will simply not allow it to continue, according to Tim Buckley, the director of Climate Energy Finance, an independent Australian think-tank.<\/p>\n\n\n\n \u201cAt the end of the day, the bigger question is, does China allow [mining companies] BHP and Rio [Tinto] and Hancock to keep making obscene rates of return if they\u2019re not investing in solutions that China wants?\u201d Buckley told Dialogue Earth. \u201cNo business sector sustainably generates 60% returns on capital employed … if there isn\u2019t a perfect moat around your business.\u201d Could that moat be about to be breached?<\/p>\n\n\n\n For the past few years, the main factor<\/a> behind emissions reductions in China\u2019s steel sector has been falling production amid weakened domestic demand. Its rollout of electric arc furnaces \u2013 cleaner alternatives to blast furnaces, fed by both recycled scrap and direct reduced iron (DRI) \u2013 has stalled. China missed<\/a> a 2025 target for 15% of production via this route. But its government has recently recommitted<\/a> to reforming the industry, and signalled<\/a> towards a low-carbon transition.<\/p>\n\n\n\n Australia\u2019s potential to make green iron has been much-hyped<\/a>, though projects to actually produce it remain in the early stages. Analysts also told Dialogue Earth of uncertainties over China\u2019s future demand for green iron. Though a changing relationship in iron and steel may be on the horizon, experts across both Australian and Chinese industry also spoke of project progress, and a range of bilateral partnerships looking to support steel decarbonisation.<\/p>\n\n\n\n Beyond think-tanks such as Climate Energy Finance, the green iron opportunity has been highlighted by Australian commentators<\/a>, miners<\/a> and policymakers<\/a>. But the issue of who will develop it first \u2013 and pay for it \u2013 remains open.<\/p>\n\n\n\n In December 2025, Australia and China signed<\/a> a memorandum of understanding committing the nations to a \u201cpolicy dialogue\u201d on steel decarbonisation, but those talks are yet to formally begin. In July this year, Australia\u2019s prime minister, Anthony Albanese, said<\/a> \u201cit will be industry that drives the major developments to decarbonise the sector\u201d. <\/p>\n\n\n\n The government has itself launched two main sources of funding that green iron advocates are eyeing: the Future Made in Australia Innovation Fund<\/a>, which has earmarked AUD 750 million<\/a> (USD 530 million) for \u201cgreen metals\u201d technology<\/a>, and the separate AUD 1 billion Green Iron Investment Fund<\/a>. But the latter has already allocated<\/a> half of its capital to overhauling the troubled steelworks at Whyalla, South Australia. An announcement on how the other AUD 500 million will be spent is expected soon.<\/p>\n\n\n\n While the Australian government is making moves to kick-start the greening process, transforming the iron export industry is impossible without private capital, Buckley said: \u201cThere is no way the federal government can use taxpayer money to transform the world\u2019s largest iron ore market into green iron. They just … don\u2019t have the capacity. They don\u2019t have the credibility. It\u2019s not their job. What they can do is facilitate and encourage private industry to do it.\u201d<\/p>\n\n\n\n Figures from the Institute for Energy Economics and Financial Analysis (IEEFA) support that view. In an August 2026 report<\/a>, the think-tank said it would cost AUD 170 billion (USD 121 billion) every year for the next 14 years to gear up to replace all the metallurgical coal Australia currently exports for steelmaking with green iron.<\/p>\n\n\n\n Though analysts including Buckley shared concerns over the pace of action on green iron development in some parts of the industry, the miners have not been doing nothing: Fortescue has been actively attempting<\/a> to set up its production, while Albanese himself highlighted<\/a> that every major Australian miner is involved in a research project or development deals with Chinese partners. A green industry roundtable<\/a> involving leading companies from both countries was hosted in Perth this July, while academic and industry partners met at an event in Shanghai in September to establish the China-Australia Green Iron Research Platform<\/a>.<\/p>\n\n\n\n \u201cTechnically, Australia has excellent renewable resources. The more difficult question is whether very large quantities of renewable electricity can be delivered reliably, at sufficiently low cost, together with the required transmission, hydrogen, water, processing and port infrastructure,\u201d Changlong Wang told Dialogue Earth.<\/p>\n\n\n\n Wang, who is associate director for industry and policy at Monash University\u2019s Monash Energy Institute in Melbourne, said: \u201cGreen iron is an energy-system challenge as much as an ironmaking challenge.\u201d<\/p>\n\n\n\n Even if Australia does overhaul its iron exports in time, the product will cost more \u2013 likely forcing miners to eat into their huge profit margins. The IEEFA analysis suggests that \u201cvoluntary\u201d green iron purchasers will pay up to 30% more for the environmentally friendly product. However, IEEFA energy finance analyst Soroush Basirat told Dialogue Earth: \u201cIt is still early days for the green iron transition, and we also need to recognise that iron and steel are highly price-sensitive commodities. The market will need time to adjust to and absorb the green premium.\u201d<\/p>\n\n\n\n \u201cAs more projects come online, additional examples will help establish a clearer benchmark for the global cost premium for products such as green iron,\u201d he added.<\/p>\n\n\n\n Monash\u2019s Wang believes that the sector has made \u201csignificant progress\u201d in the past few years. \u201cThere is now much greater research, industry and investment activity around green iron and lower-emissions steelmaking in Australia,\u201d he said.<\/p>\n\n\n\n \u201cFor me, three issues remain particularly important: reducing renewable electricity and hydrogen costs; developing technologies that work effectively with Australian ore characteristics; and understanding future market requirements and product specifications.\u201d<\/p>\n\n\n\n In practical terms, it is still early stages even for the Australian miner most keen on greening, Fortescue. Its test site in Western Australia has just produced<\/a> its first \u201chot metal\u201d. But the company\u2019s director of research and development and green metal, Tijana LaBianca said: \u201cThe material is not representative of the metal we ultimately expect to provide to customers for testing in their steel plants.\u201d<\/p>\n\n\n\n \u201cOur longer-term objective is to combine Fortescue ore, renewable energy and low-emissions processing to develop a competitive pathway to green iron production,\u201d she told Dialogue Earth. <\/p>\n\n\n\n LaBianca said the Pilbara \u2013 the region of Western Australia that accounts for over 40%<\/a> of global iron ore trade \u2013 \u201chas supplied the world\u201d for decades. \u201cThe opportunity now is to explore whether we can create more value from that resource here in Australia.\u201d <\/p>\n\n\n\n The company has signed two steel decarbonisation partnerships<\/a> focused on green iron technology with subsidiaries of the world\u2019s largest steelmaker, China\u2019s Baowu.<\/p>\n\n\n\n Wang said the recent production by Fortescue was \u201can important step\u201d but that \u201cit is important for Australia to continue exploring a range of technological pathways\u201d, including hydrogen-based DRI, electric smelting, and domestic upgrading of its ores, which are typically lower in iron content than the grades demanded by greener steel technologies.<\/p>\n\n\n\n In a 2023 report<\/a>, analysts ACIL Allen projected that developing a green iron export industry could generate up to AUD 85 billion (USD 60 billion) in gross domestic product for Australia by 2050. And a 2025 report<\/a> from the Organisation for Economic Development and Cooperation put the value of a green iron transition at between AUD 83 billion and AUD 304 billion in annual exports.<\/p>\n\n\n\n For Australia to secure the Chinese market \u2013 which has been increasingly centralising its iron trade<\/a> agreements via its China Mineral Resources Group \u2013 Buckley said China will want more.<\/p>\n\n\n\n He believes China wants to buy from \u201ca country that wants Chinese capital, wants Chinese technology, wants Chinese value-add, and is willing to partner with China. And so there is a very implied threat there that if Australia won\u2019t work with our top trade partner \u2026 that is a national geopolitical threat to Australia\u2019s economic future.\u201d He added that historical Australian caution on dealing with China could work against cooperation.<\/p>\n\n\n\n Belinda Sch\u00e4pe is the China team lead for the Centre for Research on Energy and Clean Air (CREA). She said China is still feeling the sting of trade disputes with Australia in the early 2020s. Generally, she said Chinese leader Xi Jinping\u2019s \u201cdual circulation\u201d strategy is an effort to \u201cmake everyone else more dependent on China and make China less dependent on everyone else\u201d, and the country may want to diversify its suppliers.<\/p>\n\n\n\nGreen iron ambitions need money, lots of it<\/h2>\n\n\n\n
Green iron groundwork and gains<\/h2>\n\n\n\n
![\"A](\"https:\/\/dialogue.earth\/content\/uploads\/2026\/09\/Iron-ore-mine-in-Pilbara-Australia_Aaron-Webber_Alamy_3C97NC6.jpg\")
<\/div>If not China, then who?<\/h2>\n\n\n\n