As a top iron ore and gas exporter, Western Australia plans to bridge the technology gap on green steel for the world.
Releasing the Green Steel Opportunity report, Premier Roger Cook pitched the state as an investment destination for “low-emissions” steel.
Greenhouse gas emissions from steel-making comprise more than seven per cent of the world’s industrial emissions.
“Our state’s abundant renewable energy resources alongside our world-leading iron ore industry puts WA front and centre in the global push towards green steel,” Mr Cook said on Monday.
Starting the Pilbara and Mid-West regions’ “electrification journey” could be a catalyst for electricity infrastructure and new industries including green hydrogen, according to the research by the Minerals Research Institute of WA.
But “large-scale simultaneous investments” will be needed to underpin the development of green iron ore, iron and steel.
“The capital investment, construction and logistical challenges associated with this task should not be underestimated,” the report warned.
Still, there could be a cost from the decline of one of Australia’s biggest industries if the iron ore sector fails to decarbonise.
Pressure is also building at international climate talks for carbon-intensive economies such as Australia to account for greenhouse gas emissions produced when customers use raw commodity exports.
Australian gas could be used to process iron ore into lower-carbon pellets and briquettes that would be shipped to steelmakers.
“The transition option of using natural gas has the potential to reduce emissions from iron-making by 65 per cent and is technically feasible today,” Mines and Petroleum Minister Bill Johnston said.
Under one scenario, an additional $85 billion is added to Australia’s GDP during construction and ongoing operations through to 2050.
When feasible, plants could switch to green hydrogen derived from renewable energy and Australian-made electrolysers.
WA is the world’s largest iron ore supplier, accounting for 38 per cent of global supply which is more than double the next largest supplier Brazil.
The iron ore industry is the state’s biggest industry and the largest contributor to state government coffers, generating $11.35 billion or 28 per cent of general government revenues in 2020/21.
But there is an increasing focus on the quality of iron ore feedstock being used by steelmakers, with price penalties on lower grade ores, which has implications for WA.
This provides a strong incentive for iron ore producers to improve the average grade of their product, the report found.
Steelmakers face significant challenges to reduce emissions in their energy intensive operations that largely rely on coal-fired blast furnace technology.
Ultimately, WA would host domestic production of green steel made using renewable energy.
But the replacement of gas with green hydrogen is only likely if the alternative fuel’s cost gets closer to the cost of gas, the report found.