Green iron is a prize worth billions

Decarbonising the steel industry is one of the massive challenges in meeting climate goals but could end up being extremely profitable for companies and governments prepared to take the risks.

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The steel value chain accounts for 7% to 9% of global carbon emissions, the largest single industrial contributor and hits a prime target for net-zero by 2050 goals of many countries and companies.

The problem is, however, that about 80% of steel emissions come from a single process in the route, namely using coking coal or gas to smelt iron ore, a process that now involves using vast quantities of coal.

The good news is there are available technologies to take coal largely out of the mix, and while the eventual finished steel will not be emissions-free, it is possible to get the carbon intensity down to around 300 kilogramme per tonne of steel, about one-seventh of the current 2.6 tonnes of emissions.

The bad news is that adopting these technologies at the necessary scale requires not only huge capital investments but massive amounts of cheap green energy and coordinated government regulations and incentives across all countries, from resource producers like Australia to steel makers like China and Japan.

Australia is the world's largest producer of iron ore, exporting almost 1 billion metric tonnes a year, of which more than 80% goes to China, the world's biggest importer and maker of half of global steel.

Iron ore is Australia's biggest resource export, and metallurgical coal used to make steel is in the top five, meaning the country is extremely exposed to any sustained shift in global steel production to lower emissions.