BHP, a major mining company, has stated that establishing a “green iron” industry in Australia is cost-prohibitive, Reuters said in a report.
BHP’s declaration comes after Australia and China reached an agreement this week to collaborate on decarbonising the steel supply chain, which accounts for nearly 10% of global emissions.
Geraldine Slattery, BHP Australia’s chief, participated in business roundtables this week in China with Australian and Chinese industry leaders. She stated that the production costs for low-carbon steel are not viable.
Slattery said in a social media post late on Tuesday;
Even with generous policy support, the cost of production (in Australia) would be double that of the Middle East and China – and customers many thousands of kilometres away.
Mining CEOs, including Slattery, joined Australian Prime Minister Anthony Albanese on a recent trip to China. During this visit, Albanese advocated for increased collaboration between Australia and China in the development of green steel.
The initiative highlights a growing international focus on sustainable industrial practices and the potential for partnerships to drive innovation in the mining and steel sectors, aiming to reduce environmental impact.
Lack of interest
BHP, the world’s largest mining company, expressed a lack of interest in directly producing “green iron ore or steel,” stating that it was not part of its strategy.
This stance served as a reality check for Australia’s aspirations in the sustainable steel industry, highlighting the significant challenge of gaining full commitment from major global players in transitioning to greener production methods.
It also underscores the complexity and differing priorities within the industry regarding environmental initiatives.
Australia provides a substantial 60% of China’s iron ore, crucial for its steel industry.
However, a significant challenge arises from the ore’s low-grade quality. This inherent characteristic means it cannot be directly processed into steel using renewable energy sources.
Instead, an additional processing step becomes necessary to upgrade the ore, incurring extra costs and resource consumption.
Green iron, a low-carbon foundation for producing green steel, is created when hydrogen from renewable energy sources or biomass replaces coal in this additional process.
Widespread commercial adoption of these methods is anticipated no sooner than the next decade.
This dependency on Australian supply, coupled with the need for further refinement, highlights a complex interplay between resource acquisition and sustainable manufacturing practices for China.
Minerals processing industry
Australia aims to establish a robust minerals processing industry, moving beyond its current reliance on raw material exports, which generate approximately A$370 billion ($242 billion) annually.
This strategic shift seeks to diversify its economy and add value to its abundant mineral resources.
However, this ambition is significantly challenged by the country’s high power prices and substantial labour costs, which impede the competitiveness and profitability of such an industry.
Addressing these economic hurdles is crucial for Australia to successfully develop its processing capabilities and enhance its global trade position.
The government committed A$1 billion in February to bolster the manufacturing of green iron and its associated supply chains.
In December, BHP, Rio Tinto, and Bluescope Steel reached an agreement to collaborate on a pilot plant project.
This plant aims to produce low-carbon iron utilizing renewable energy and direct reduced iron technology within an electric smelting furnace (ESF). The potential operational start date for this initiative is 2028.
A pilot plant for Fortescue is scheduled to produce green iron this year, marking a significant step in their green iron project.
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