Steel trap: Australia must make green metal or risk ore
The report stated that Australia must take urgent action to establish a domestic green steel industry, otherwise it may face the risk of losing its $120 billion iron ore export market.
Climate Energy Finance issued the warning on Thursday in a 69-page report into the sector recommending further support to eliminate risks from early projects and changes to put green metals on a level playing field with imports.
The findings come more than a year after the federal government launched a $1 billion Green Iron Investment Fund to support initial projects and the Whyalla steelworks conversion, but also as large-scale green iron installations failed to reach a final investment decision.
The group’s study, Arc of Ambition, analyzed Australian and international efforts to produce and use green steel and iron.
It found that producing green steel was the second-largest decarbonisation opportunity in the world and that Australia, the world’s largest iron ore exporter, could play a key role.
But lead author and head of research at Climate Energy Finance, Matt Pollard, said the Australian industry had not yet embraced the opportunity due to a range of barriers making green steel production difficult.
“When we talked to steel producers we realized that steel was falling through the cracks of the Made in Australia Future policy,” he told AAP.
“Australia has an opportunity to learn by doing in the local context.”
The report stated that green iron production has stopped due to difficulties in hydrogen production, but electric arc furnaces powered by renewable energy can be used to produce green steel in Australia.
The technology has delivered a commercially proven, low-risk method of green steel production that can be built within a year at sites in Western Australia, South Australia and Queensland.
But Mr Pollard said the federal government would need a new strategy to support these practices as Australia’s major steelmakers were unlikely to lead the change.
“None of these projects have a core equity investor… most of the electric arc furnace companies are actually start-ups,” he said.
“We need to see decarbonization of steel production coming from these start-ups, but there is a huge challenge for them to reach financial close.”
The report recommended launching a national iron and steel decarbonization strategy with grants and loans to overcome the hurdles, and a carbon border adjustment mechanism that would enable locally produced green steel to compete with high-emission imports.
Climate Energy Finance Director Tim Buckley said eliminating emissions from steel could help secure the future of Australian iron ore exports and create new jobs.
“Steel has long been exempt from liability due to its large amounts of carbon pollution because it is difficult to reduce,” he said.
“Electric arc furnaces powered by renewable energy and fueled by scrap steel and (directly reduced iron) are proof that this is not a plan, but an excuse.”
