Australia’s iron ore sector at a crossroads – Business as usual or time to embrace green iron?

Thanks to their cost efficiency, Australia’s major iron ore miners are likely to continue business as usual. Billions of dollars of infrastructure in the Pilbara region and economies of scale will shield iron ore miners from fierce cost competition so Australian miners may be the last to fall. 

Some analysts believe the massive Simandou project in Guinea will have little impact on Australian iron ore miners, which are among the lowest-cost producers globally, and any additional supply is likely to push higher-cost producers out of the market. While this is partly true, the potential pressure from these new entrants should not be overlooked. 

Australian iron ore miners emphasise that the global steel industry is growing, and that declining demand in China – by far Australia’s largest iron ore customer – is likely to be offset by increases in other key markets, including South-east Asia and India. 

India – the world’s fourth-largest iron ore producer (albeit generally of lower grade) – is largely self-sufficient, with the potential to export iron ore to China when prices are high enough. It remains unclear how much domestic new steel plants in India will rely on imports in the future. Major iron ore miners such as Vale are also seeking to expand their presence in these emerging markets. The extent to which declining demand in China will be offset by growth in other regions therefore remains an open question.

Iron ore is expected to face a long-term decline in revenue due to lower prices, with the Australian government forecasting the nation’s iron ore export earnings could fall from AU$117 billion in FY2024-25 to AU$81 billion in FY2029-30. This declining trend was reflected in the federal budget FY2025-26 and in the Commonwealth Bank's projections, albeit with a steeper outlook.

Even if Australia’s iron ore mining sector is not at risk, it is approaching the end of its boom after decades of exceptionally high demand growth from China.

The dynamics of the global iron ore trade are evolving, and Australia is vulnerable to these shifts, particularly those driven by China, the buyer of about 85% of its exports. 

China’s steel demand has been in decline throughout this decade. In 2025, China recorded its lowest steel production in seven years, and 2026 is expected to continue this downward trend. A series of recent challenges all point to intensified headwinds in this market for Australia (see Table below).

It is worth noting that all of this is occurring before additional iron ore from the recently commissioned Simandou mine enters the market at scale. This could further worsen the already challenging position for Australian iron ore miners, which are also struggling with degradation of iron ore quality.

Meanwhile, China is moving towards using hydrogen in steelmaking, with several initiatives following the opening of Baosteel’s first 1 million tonne direct reduced iron (DRI) facility. China already produces the lowest-cost renewable hydrogen globally and is well positioned to scale green iron production using iron ore imported from Brazil and West Africa (particularly Simandou). Given China’s track record in rapidly expanding renewables and battery sectors, this transition could happen faster than expected.

The war in the Middle East has prompted China, which is highly reliant on fossil fuels, to reassess its energy security strategy. Its latest five-year plan places greater emphasis on the role of green hydrogen in decarbonisation, including across industrial sectors. This shift is not mere hype for the world’s largest producer of clean energy.

China’s emissions trading system (ETS) now includes the steel sector, and is expected to introduce absolute emissions caps by 2027, replacing the current intensity-based approach. This shift will place increasing pressure on steelmakers to seek higher-grade raw materials and adopt lower-emissions production pathways.

As the market tightens, Australian miners’ negotiating power weakens by the day, and customer loyalty can no longer be taken for granted.

Green iron opportunity

Australia supplies about 52% of the global seaborne iron ore market, but it cannot afford to ignore the emerging market for high-grade ores and green iron production. Green iron requires a fully integrated value chain that can unlock new markets for iron ore exports while enabling domestic ironmaking in Australia.

Although high-grade iron ore represents only about 5% of the total market, its growth rate is significant as more steelmakers shift to low-emissions ironmaking using direct reduction technology. By 2035, a noticeable supply gap of about 70 million tonnes a year is expected, which could restrict global DRI production. If Australia acts quickly, it can position itself to supply this market within the next decade, before more established competitors make it harder for new entrants to gain a foothold. 

Beyond supplying higher-grade iron ore, Australia is increasingly shifting toward innovative ironmaking solutions aimed at enabling the use of lower-grade Pilbara ores. These emerging pathways are niche, but hold the potential to evolve into mainstream ironmaking routes globally if successfully scaled. 

Studies estimate Australia’s green iron export market could be worth about AU$300 billion, almost triple its iron ore exports of AU$116 billion in FY2024-25 and falling. Processing Australian ore into iron can add significant value to exports as iron ore prices decline. Doing this with green hydrogen would add maximum value by capturing green premiums not available to iron ore processed using gas.

The expansion of scrap-EAF capacity in South-east Asia, combined with regional scrap scarcity, creates an opportunity for future H₂-DRI/hot briquetted iron (HBI) exports. This opportunity is already being realised by companies such as Meranti Green Steel, which plans to supply low-emissions HBI to its Thailand EAF operations from its plant in Oman.

In the emerging global landscape of decarbonisation, some regions are seeking to attract investment and position themselves as industrial hubs. Oman, for example, aims to build its economy around sustainability by hosting green industries.

The war in the Middle East and its implications for the global iron and steel sectors have refocused attention on Australia’s opportunity to position itself as a future green iron exporter, an ambition it should actively pursue.

Australia’s iron ore industry must take an active role in shaping new markets driven by decarbonisation and emerging green industries, rather than simply following market trends fuelled by demand for polluting technologies in developing countries. The time to pivot is now.

Australia responded effectively to demand growth from Asia and built a high-performing iron ore industry in the Pilbara. It now faces another major shift in the market. The question is: Can it adapt again?