Australia could unlock billions of dollars in manufacturing investment by accelerating the development of low-emissions steelmaking, according to a new report from Climate Energy Finance (CEF), which warns that the country’s iron ore export industry faces growing exposure as global steelmakers decarbonise.
The report, Arc of Ambition, calls for a National Iron and Steel Decarbonisation Strategy, a Carbon Border Adjustment Mechanism and strategic investment in domestic green steelmaking as Australia seeks to strengthen its position in evolving global supply chains.
CEF said Australia’s position as the world’s largest iron ore exporter was increasingly exposed because major North Asian trading partners are moving to reduce emissions from steel production, while much of Australia’s Pilbara ore is higher impurity and lower grade.
The report said this transition could put Australia’s $120 billion-a-year iron ore export sector at risk, while also creating an opportunity to expand manufacturing through electric arc furnaces (EAFs).
EAFs use electricity, including renewable power, to produce steel and can operate at substantially lower emissions than traditional coal-fired blast furnaces, according to CEF. The report identified potential EAF projects in Collie in Western Australia, Whyalla in South Australia and greater Brisbane in Queensland as early opportunities.
CEF Head of Research and lead author Matt Pollard said the transition could help rebuild Australia’s manufacturing capabilities while developing experience in coordinating large industrial projects.
“Domestic statecraft to build Australia’s EAF-based low-emissions steel industry would allow government to build expertise in coordinating investment, aligning common user infrastructure, supporting critical supply chains, enabling skilled workforce development, and adapting policy,” Pollard said.
CEF said developing EAF capacity could also support new renewable energy investment and regional employment, while creating potential future demand for green iron production.
CEF Director and report co-author Tim Buckley said government policy would be important in making low-emissions steel projects commercially viable.
“Australia needs to see that FMIA is more than a slogan, and that real low emissions industries of the future are being built, bringing regional investment, new high value employment opportunities and enhancing our trade profiles,” Buckley said.
The report recommends changes to industrial policy, including a carbon border adjustment mechanism for emissions-intensive, trade-exposed industries such as steel, as well as an eventual phase-out of exemptions under the Safeguard Mechanism.
Buckley said EAFs using renewable energy, scrap steel and direct reduced iron demonstrated that lower-emissions steelmaking was possible, while arguing that further public support was needed to help industry invest in new facilities.
UNSW Professor Liz Thurbon, Director of the Green Energy Statecraft Project and author of the report’s foreword, said building new industries would require governments to coordinate infrastructure, finance, procurement, regulation and skills.
“The great strength of this report is that it connects Australia’s resource and renewable-energy endowments with a practical pathway for industrial renewal in the iron and steel sector,” Thurbon said.
CEF said steelmaking accounted for 9.4% of global carbon dioxide emissions in 2024, making steel decarbonisation a major opportunity for emissions reduction outside the electricity sector.