As momentum builds globally for low-emission steelmaking, Australia’s ambition to lead in “green iron” is facing harsh commercial realities. BHP — the world’s largest mining company — has publicly questioned the financial viability of producing green iron in Australia, citing prohibitively high costs even with policy incentives in place.
Speaking after a green steel session in China that included Prime Minister Anthony Albanese, major miners, and Chinese steelmakers, BHP Australia President Geraldine Slattery stated bluntly:
“Even with generous policy support, the cost of production (in Australia) would be double that of the Middle East and China – and customers many thousands of kilometres away.”
This declaration comes despite a fresh bilateral agreement between Australia and China to jointly decarbonise the steel supply chain, which currently accounts for nearly 10% of global emissions. The lack of enthusiasm from BHP — a central figure in Australia’s mining economy — offers a sobering reality check on the feasibility of local green iron production in the near term.
Industry Tension on the Global Stage
BHP’s position has not gone unchallenged. Fortescue Metals founder Andrew Forrest, also present in Beijing, was quick to criticise Slattery’s remarks, questioning why BHP was at the green steel table if it had no intention to commit.
“All I know is that the customer wants green iron ore,” Forrest told Reuters. “The Pilbara is in a position to produce green iron ore and therefore must.”
His comments reflect growing tension within Australia’s mining leadership about how best to future-proof the sector’s value chain — particularly its critical iron ore exports to China, which make up roughly 60% of Chinese imports.
The Economics Behind Green Iron
Green iron is essentially low-carbon iron ore processed using renewable hydrogen or biomass instead of coal — an intermediate product used to make green steel. However, Australia’s iron ore is generally lower grade and requires extra processing steps to qualify. These additional stages, combined with high electricity prices and labor costs, significantly undermine Australia’s competitiveness compared to regions like China or the Middle East.
Despite this, the Australian government continues to invest in domestic processing capabilities. In February, it pledged A$1 billion to support green iron manufacturing and its supply chains. The broader aim is to diversify the country’s heavy reliance on raw material exports, which currently generate A$370 billion annually.
Pilot Projects and Future Potential
BHP, alongside Rio Tinto and Bluescope Steel, has not abandoned green iron entirely. The three companies announced plans in December 2023 to develop a pilot plant using renewable power and electric smelting furnace technology, targeting a potential launch in 2028. Fortescue, on the other hand, is moving more aggressively — aiming to begin production from its own green iron pilot plant later this year.
Strategic Takeaway
Australia’s push to build a homegrown green iron industry is emblematic of the broader industrial energy transition: high on aspiration, but constrained by costs and infrastructure readiness. BHP’s caution signals the need for a more nuanced, commercially viable path forward — one that balances bold decarbonisation targets with real-world economic conditions.
In the coming years, the key challenge will be aligning government ambition, customer demand, and miner strategy — especially as markets like China increasingly prioritise lower-carbon imports. Whether Australia can meet that demand competitively from home soil remains a question the industry is still grappling with.
IMAGE: Reuters
