Article by Primrose Riordan, courtesy of Bloomberg
25.07.2025
Watching Prime Minister Anthony Albanese’s press conference during his trip to Beijing last week, one might be convinced that Andrew Forrest had a ministerial role.
Fortescue’s executive chairman was called on multiple times to help answer questions, as Albanese offered up the stage after a dialogue between the companies and Chinese steelmakers on “green steel”.
“[Green metals] will generate hundreds of thousands of jobs, but critically, it protects the hundreds of thousands of jobs which are already employed by the iron ore industry,” Forrest said.
Processing iron ore into steel via green energy is a tantalising idea. With steel production responsible for more than 10 per cent of carbon emissions, its supply chain desperately needs to be decarbonised.
The idea that Australia could future-proof its iron ore industry by making “green iron” for Chinese steelmakers is even more appealing for policymakers watching Chinese demand waver. And in China, Forrest was doing his best to convince the prime minister that the nascent sector was worth investing in.
Forrest has characteristically talked up the company’s prospects, vowing to ship the first green iron this year. Back in 2023, He said Fortescue had made a major breakthrough in producing green iron using a proprietary membrane that other companies would soon be rushing to license.
Two years later, however, the process remains unproven. Green iron can’t be made cheap enough yet, nor in large enough quantities.
Mining companies are experimenting with various technologies. Fortescue is trying several, including green hydrogen and another process called low-energy direct electrochemical reduction (LEDER), which uses electricity to break down iron ore and extract iron.
Economically unviable
The most recent scientific data on Fortescue’s progress in LEDER technology was published as part of a patent back in 2024. It showed the company producing green iron with an average 2 per cent efficiency, meaning about 98 per cent of the energy used to produce the iron was lost, making the process economically unviable.
Asked about the results, Fortescue said they didn’t publish more updated figures to protect commercial confidentiality. “Further patents have been lodged but have not yet been published by the relevant patent organisations,” a company spokesman said. “Fortescue’s LEDER technology does work and is showing a pathway to significant energy efficiencies. As with all innovative technology, the primary challenge at this stage is scale-up.”
The results were reviewed by John Pye, an associate professor at the Australian National University’s school of engineering who works on steel decarbonisation.
“These kinds of low efficiencies are typically for early-stage … technologies and it highlights that there is still significant R&D to be done to take the idea to commercialisation,” he says, adding that considering the timeframe the company might have easily made progress since then.
A recent research report from Fortescue and university scientists working on the company’s Australian Renewable Energy Agency-funded LEDER project in Perth further showed the internal challenges, AFR Weekend can reveal.
Fortescue scientists said the company’s board was to have considered approving a second green iron LEDER plant in the Pilbara with a project budget of $US70 to $US100 million at a first-quarter board meeting.
That would have facilitated the possibility of shipping green iron from the proposed plant by 2027.
But a Fortescue spokesman said “a decision to build a LEDER pilot plant in the Pilbara has not been made and will be considered once the laboratory and research and development works in our Perth facility are sufficiently advanced”.
Seeking subsidies
Other Pilbara players are also in on the game. BHP, Rio Tinto, Woodside and BlueScope have a joint project dubbed NeoSmelt in Perth’s Kwinana to attempt to make green iron via an electric smelting furnace. The project has gained nearly $95 million in government funding but is expected to cost hundreds of millions more.
Even before the project has gotten off the ground, however, BHP Australia president Geraldine Slattery said that making green iron in Australia will be too expensive. “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,” Slattery said in a LinkedIn post last week.
Fortescue has another major project at Christmas Creek to produce green iron using hydrogen coupled with an electric smelting furnace.
But the commercialisation of a green iron industry using hydrogen would also require the fuel to be produced abundantly at economically reasonable prices – something which is very much a theoretical concept at this stage despite huge government investment. Fortescue this week revealed a $US150 million ($228 million) impairment charge against its results after abandoning plans for hydrogen projects. It was just one among many global companies that withdrew from plans to develop the fuel.
“If we want to produce green iron, we would need to have production of green hydrogen cost competitive with China, and there are still questions over that,” says Jorrit Gosens, who researches Chinese energy policy and the green steel supply chain at ANU. Chinese projects using hydrogen to make steel have proliferated over the past two years, according to think tank Transition Asia.
Gosens says Australia may have an advantage on the electricity side, as we have vast amounts of sunshine and land to produce renewable energy. Further, there might be opportunities to sell the green iron to markets other than China, such as Japan, Korea, Taiwan and India.
Previously, Fortescue and others lobbied for large hydrogen subsidies. Now, the industry wants government help to step up efforts to make green iron commercial in Australia, arguing the country could gain a first-mover advantage.
Fortescue Metals chief executive Dino Otranto says China was serious about considering Australia as a supplier. “China has clearly shown its interest in engaging with Australia on the future of green steel, with the presence of its top steel industry leaders at the table alongside Australia’s iron ore majors during Prime Minister Albanese’s visit to China last week,” he tells AFR Weekend. “Those large steel mills are dedicating extensive time and resources to work with us on solutions that will unlock the green steel value chain.”
China is the world’s largest producer and consumer of steel and is conducting its own experiments in green metals as it grapples with pollution from one its most carbon intensive industries. Gosens says the Chinese state’s spending power is likely to outpace Canberra’s.
“Our current assessment at ANU is that it seems China could do it cheaper … and if that’s the case then the argument for China importing green iron from Australia is less obvious,” says Gosens. “If you have an operational green iron industry already maybe China would be happy not to duplicate that investment, [but] it’s not clear-cut. If it comes down to requiring subsidies from the federal government, it’s a hard story to tell that we would out-subsidise the Chinese government.”