Hydrogen’s Potential to Bring Green Iron Production to Australia

July 4, 2024 – (IEEFA Australia): Global The move to green hydrogen steelmaking offers Australia huge potential to process its vast onshore iron ore resources for export, according to new research from the Institute for Energy Economic and Financial Analysis (IEEFA).

Steelmakers around the world are facing growing pressure from investors and the effects of increasingly restrictive trade-restrictive regulations, such as the EU’s Carbon Border Adjustment Mechanism (CBAM).

Hydrogen-based direct reduced iron (DRI) is a key alternative to fossil fuels in iron production. Renewable energy sources in Australia will make green hydrogen production relatively cheap, prompting interest in the possibility of processing iron ore on land into “green iron” for export to steelmakers seeking to reduce emissions.

The government’s Future Made in Australia initiative aims to harness the domestic benefits of renewable energy to support manufacturing in the energy transition. It includes a green hydrogen production tax of A$2/kg of green hydrogen and a further A$1.3 billion to fund the development of green hydrogen projects over the next decade through the Hydrogen Headstart program.

“Given that hydrogen exports appear to be prohibitively expensive, Australian green hydrogen should be used domestically, with iron production being a key potential recipient.” says Soroush Basirat, Energy Finance Analyst at IEEFA, Global Steel Sector.

“Iron ore is Australia’s largest export, meaning a truly low-carbon transformation of this sector using green hydrogen is a potential the most influential Hi The future is made in Australia plan.”

However, the government’s strategy for the future of gas maintains that Gas will be a key part of Australia’s energy system, which also includes iron and steel production.

“These strategies present divergent and conflicting paths for the future of iron production in Australia,” says Simon Nicholas, IEEFA’s principal analyst for global steel.

“Continued reliance on gas poses risks to Australian manufacturing in a world transitioning away from fossil fuels.

“You can’t make green iron from gas. As other countries explore and pursue their green iron and steel opportunities, Australia needs to move quickly to become the world leader in green iron, not just the leader in iron ore.”

New green iron production projects using green hydrogen are emerging in Australia:

• In Queensland, Quinbrook Infrastructure Partners’ A$3.5 billion ($2.3 billion) green iron project aims to use green hydrogen from the nearby CQ-H2 plant, one of six projects shortlisted for funding under the Hydrogen Headstart program. Production is due to begin in 2028.
• The South Australian Government plans to develop a green hydrogen DRI power plant by 2030, utilising abundant renewable energy sources (solar and wind) and large deposits of high-grade magnetite iron ore to produce DRI-based steel.
• In Western Australia, Fortescue is already building a pilot green iron plant at Christmas Creek, while its Iron Bridge magnetite mine is increasing production of steel-grade ore using DRI technology, with the aim of becoming a major supplier of green iron to China.

International automakers are already signing agreements to buy green steel, which is made using green hydrogen with virtually no emissions. The definitions of what constitutes “green iron” and “green steel” are only expected to get tighter.

“There is a significant risk that steel produced using gas – with or without CCS – will not meet these definitions,” says Mr Basirat.

“Steel and iron producers will increasingly face the risk that steel consumers will not want fossil fuels in their supply chains at all.”

Read the report: Hydrogen has huge potential for onshore green iron production in Australia

Contact with the media: Amy Leiper, tel. 0414 643 446, (email protected)

Contact with the author: Sorush Basirat (email protected); Simon Nicholas (email protected)

About IEEFA:The Institute for Energy Economics and Financial Analysis (IEEFA) researches issues related to energy markets, trends and policies. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (ieeffa.org)