Green iron exports: Australia must look beyond China

With China’s steel boom over, the outlook for Australia’s iron ore exports is one of declining volumes and values, with significant revenue implications for the federal and Western Australian (WA) governments. Additional downside risks may further erode demand for Australia’s biggest export.

The production of green iron has been identified as an opportunity for Australia to add value to a declining export. Now this is starting to look more like an economic necessity than an opportunity. However, China’s global green hydrogen dominance and its strategic imperative to reduce reliance on imports from Australia may limit green iron trade between the two countries.

Given the risk that China’s future green iron imports from Australia may disappoint, alternative markets need to be prioritised. In addition to Japan and South Korea, both of which are established iron ore customers, Australia is well located to supply the two key drivers of global steel demand growth, both of which are located in the Asia-Pacific – India and Southeast Asia.

• Around 80%-85% of Australian ore is shipped to China. However, China’s crude steel production peaked in 2020 and is in structural decline. Australia’s federal government now forecasts that iron ore export volumes will peak in the next two years before going into decline throughout the rest of the decade. China’s steel exports are likely to fall as nations revert to protectionism to defend their steel industries, further impacting its iron ore demand.
• Australia’s iron ore export earnings are forecast to drop AUD44 billion from AUD123 billion in 2025-26 to AUD79 billion in 2030-31 (real terms, base 2026-27) on lower prices and volumes. According to the Australian government’s 2025-26 Mid-Year Economic and Fiscal Outlook, a decrease in the iron ore price of USD10 per tonne (t) decreases nominal GDP by AUD4.8 billion in 2025-26, rising to AUD9.9 billion in 2028-29. 
• In WA, royalty income from iron ore is estimated at AUD8.8 billion for 2025-26 and forecast to account for 81% of the total royalty income for that year. A USD1/t decrease in the iron ore price is estimated to lead to a AUD93m drop in state revenue, according to the 2026-27 state budget. The WA government forecasts that state iron ore royalty income will decline by AUD1.7 billion (-19%) in 2026-27, then by a further AUD1.2 billion in 2027-28 on the back of falling iron ore prices. 
• Numerous downside risks could see China’s iron ore demand fall even quicker than forecast. The ramp-up of the Simandou iron ore mines in Guinea is now happening faster than previously expected. All output is likely to be shipped to China, and S&P Global forecasts that the seaborne iron ore market will be pushed into oversupply until the mid-2030s. As China’s iron ore demand falls, a greater proportion of its remaining demand looks likely to be met by supply from outside Australia. 
• New supply from Simandou has emboldened China Minerals Resources Group (CMRG) to use stronger tactics in negotiations with major Australian iron ore miners, including BHP and Fortescue. Given the importance of minerals security and China’s huge reliance on iron ore imports, CMRG’s longer-term motivation may be as much geopolitical as financial. China’s mitigation approach in response to the strategic vulnerability of being highly dependent on Australian iron ore can be expected to continue.
• Scrap steel recycling in China is set for sustained growth due to its strategic importance and the significantly higher volumes of scrap steel that will become available. Domestic scrap steel is already a bigger source of iron for China than any of the iron ore mining majors. Growing scrap steel consumption will see China’s iron ore demand decline faster than its steel demand.
• Amid the outlook of declining volumes and value of its iron ore shipments, green iron production gives Australia the prospect of adding value to its biggest export. Studies have calculated that processing iron ore into green iron for export could add between AUD133 billion and AUD269 billion to the value of Australia’s exports. Given its reliance on, and the declining outlook for, its iron ore exports, Australia faces an economic imperative that ought to act as a catalyst for green iron development. 
• Fortescue has in the past voiced a target to reach 100 million tonnes per annum (Mtpa) of green iron exports to China. As Australia’s biggest iron ore customer, China is a logical destination for future green iron exports. Fortescue has been open about its strategy of purchasing Chinese energy and mining equipment to maintain good relations with China. However, this did not stop CMRG blacklisting some of Fortescue’s iron ore in July 2026. Fortescue has responded by stating that it is continuing to look into new sources of demand, specifically naming Southeast Asia and India.
• China is positioning itself well to make green iron domestically. China is leading the world in green hydrogen project development, assisted by its dominance in renewable energy, battery and electrolyser technologies. The need for China to rely on green hydrogen produced in Australia to reduce iron ore is questionable, though regional differences in the cost of green hydrogen production within China may provide Australia with some green iron export opportunities. China remains highly dependent on Australian iron ore for coal-based steelmaking but, given its strategic concerns and its global lead in green hydrogen, Australia’s biggest iron ore customer may not necessarily become its biggest green iron export destination.
• Given the risk that China may not be as big a green iron customer as hoped, Australia needs to increase focus on alternative opportunities. The two key locations driving global steel demand growth are both within the Asia-Pacific – India and Southeast Asia. 
• Thailand could soon be an importer of iron made using 15% green hydrogen. Meranti Green Steel plans to build a 2.5Mtpa direct reduced iron (DRI) plant in Oman, which will run on 15% green hydrogen before progressively ramping up the proportion thereafter. Some of the iron produced in Oman will be shipped to Thailand to be processed into steel via an electric arc furnace (EAF), along with scrap steel. The green iron import model looks set to be demonstrated in practice in Southeast Asia.
• India’s iron ore self-sufficiency has made it seem a less likely green iron export destination, but this is about to end. The Australian government forecasts that India’s iron ore imports will rise from virtually nothing to 50 million tonnes by 2031. India’s Jindal Steel recently stated that it plans to import DRI/HBI [hot briquetted iron], given a shortage of available metallics such as scrap steel. Exploring green iron exports to India would give Australian a value-added opportunity to tap into the world’s biggest steel demand growth market.