Decarbonising steel value chains - Australia's global opportunity
- Tony Gourlay
- Jul 14
- 3 min read
Updated: Jul 18
The steel industry stands at an inflection point. As geopolitical trade tensions fragment global supply chains and net zero commitments accelerate decarbonisation, Australia confronts a defining choice: remain a raw materials supplier or capture value across the entire steel production chain.
Steel generates 2.8 gigatonnes of CO2 annually—8% of global emissions—and must achieve net zero by 2050. With 78% of China's blast furnace capacity requiring reinvestment by 2030, the next decade will determine global green steel leadership.
The urgency has been amplified by recent trade disruptions. President Trump's decision to double steel tariffs to 50% in June triggered supply chain disruptions, affecting $61 billion in annual trade. Companies are responding with "China +1" strategies, diversifying supply bases to reduce geopolitical risk. This coincides with growing demand for sustainable materials—major automakers including Volvo, BMW and Mercedes-Benz have committed to sourcing low-carbon steel, creating premium markets that Australian producers could capture.
These market openings align with technological breakthroughs that make integrated Australian value chains increasingly viable. Hydrogen-based direct reduction achieves 90% emissions reductions, producing steel with 150kg CO2 per tonne versus over 2,000kg conventionally. Electric arc furnaces powered by renewable electricity offer similar reductions.
Yet challenges remain formidable. ThyssenKrupp's €3 billion green steel project faced turbulence when the company suspended its hydrogen procurement tender due to higher costs. Meanwhile, China introduced the world's first national low-carbon steel standard in October, signalling its intent to lead the transition.
Crisis catalyses unprecedented policy response
Australia's steel vulnerability crystallised when South Australia forced Whyalla steelworks into administration in February. The facility produces 75% of Australia's structural steel—its near-collapse exposed critical gaps in industrial sovereignty while highlighting the strategic importance of BlueScope Steel, the nation's largest integrated steelmaker and dominant player in flat steel products.
The federal government's $1 billion Green Iron Investment Fund represents the largest commitment to steel decarbonisation in Australian history. Australia currently ships 900 million tonnes of iron ore annually to be processed elsewhere, indirectly generating 1,500 million tonnes of CO2—more than twice domestic emissions.
Major projects showcase integration potential. Green Steel of Western Australia's $400 million Collie mill will use electric arc furnaces powered by renewable energy to produce 450,000 tonnes annually from 2026. The $2.5 billion Geraldton DRI plant will convert iron ore into green direct reduced iron.
Australia's world-class solar and wind resources provide crucial competitive advantage. Key policy initiatives include the $1 billion Green Iron Investment Fund, $750 million Innovation Fund for green metals, Hydrogen Production Tax Incentive of $2 per kilogram from 2027-2040, and the National Reconstruction Fund allocating $3 billion specifically for green metals.
Collaboration reshapes entire value chains
The transformation creates opportunities for cross-industry collaboration across multiple sectors. In renewable energy, steel accounts for 50% of lifecycle emissions from windfarms, with offshore wind projects requiring 20-25 million tonnes of steel between 2026 and 2050. The automotive sector, representing 12-15% of global steel demand, faces parallel opportunities as the average vehicle contains more than 50% steel.
Australia's mining giants—Rio Tinto, BHP and Fortescue—represent critical upstream partners whose iron ore operations form the foundation of any integrated domestic steel value chain. Their coordination with downstream processing represents a fundamental requirement for success.
The SteelZero initiative demonstrates how collaboration can scale, spanning eight sectors with members committing around 10 million tonnes of steel to decarbonisation. Technical collaboration advances through initiatives like HYBRIT, which demonstrated hydrogen storage facilities that can reduce variable production costs by 25-40%.
Global competition is intensifying rapidly. ArcelorMittal has committed €25 billion to decarbonisation technologies, POSCO is scaling up hydrogen-based technology, and Chinese producers are investing heavily in electric arc furnaces. The investment case strengthens through mechanisms like the EU's Carbon Border Adjustment Mechanism, but the window for establishing competitive positioning is narrowing.
Building Australia's steel coalition
Australia's green steel opportunity demands unprecedented collaboration across the entire value chain—from miners and steel producers to automotive manufacturers, construction companies, and financial institutions.
A coalition spanning upstream iron ore producers, renewable energy developers, hydrogen manufacturers, steel producers like BlueScope, and downstream sectors must work in concert. This requires coordinated investment in shared infrastructure, aligned technology roadmaps, and integrated supply agreements that distribute both risk and reward across multiple industries.
Government support must facilitate these partnerships through targeted incentives for value chain collaboration, streamlined approvals, and international trade agreements. Financial institutions play a crucial role in structuring deals that spread risk while providing patient capital for long-term industrial transformation.
Success will demonstrate Australia's capacity to add value across multiple industries simultaneously, positioning the nation as a clean manufacturing powerhouse. The opportunity is unprecedented. The question is whether Australia will seize it—not as independent actors, but as a coordinated value chain capable of global competition and leadership in the decarbonised economy.
