BHP doubts the viability of the green iron industry in Australia

Even with political support, production costs will be twice as high as in the Middle East or China

Mining company BHP believes that it is too expensive for Australia to develop the green iron industry and that the investment will not pay off. This was reported by Reuters.

BHP Australia CEO Geraldine Slattery, who participated in business roundtables with Australian and Chinese industry leaders in China, noted that the economic feasibility of independent production of green iron or steel in Australia is not justified.

“Even with generous political support, the cost of production will be twice as high as in the Middle East or China — and customers are thousands of kilometers away,” she wrote on social media.

Instead, she said, the company is focused on securing Australia’s position as a global leader in low-carbon mining and all the benefits that this will bring to the country.

Sletteri and other mining company CEOs accompanied Australian Prime Minister Anthony Albanese on his visit to China this week. Albanese said the two countries should work more closely together on green steel.

BHP’s lack of enthusiasm, the agency notes, has been a reality check for Australia’s ambitions.

Australia supplies about 60% of China’s iron ore needs. However, its raw materials are of too low quality to be directly processed into steel using renewable energy, so an additional processing step is required. The country is seeking to develop its mineral processing industry to diversify its raw material exports, but this is hampered by high electricity prices and labor costs.

Sletteri also noted that the largest reduction in carbon emissions from steel production over the next two decades will not come from processing iron ore in Australia, but rather from modernizing China’s blast furnaces. The company expects them to operate for at least 20-30 years. Therefore, BHP is investing in research, development, and pilot implementation of low-emission steel production technologies to support continued demand for raw materials from the Pilbara region.

The head of BHP Australia recalled that in May, thanks to a partnership with China’s Baowu, ore from Pilbara was successfully tested for direct reduced iron (DRI) production on an industrial scale.

In February, Australia launched a new $1 billion (A$636 million) Green Iron investment fund. The fund will promote the development of environmentally friendly iron production and supply chains by supporting such projects and stimulating large-scale private investment.