For more than three decades, iron ore has underpinned the Western Australian and national economy – creating hundreds and thousands of jobs and generating well over $1 trillion in export revenue. During this time WA has grown to become the world’s largest iron ore producer, responsible for approximately 38% of global supply.
“As the country’s largest export, Australia fiercely protects its iron ore industry – and rightly so,” says Paul Howard, Partner for Gerard Daniels. “However, this commodity is often held up as the only hero of our economy, when other elements that support steelmaking don’t get the same level of attention or backing.”
This imbalance has led Paul to question whether Australia’s focus on direct shipping iron ore (DSO) may have contributed to more limited production of other steelmaking commodities. “Iron ore remains a critical industry, but have we exploited enough opportunities across the broader supply chain to grow and sustain our competitive advantage in other global markets?” he says.
With a highly skilled workforce and an abundance of natural resources, Australia is well equipped to diversify its contribution to steelmaking and to grow the commodities and technologies that could support a broader and more sustainable local steel industry. Here Paul explores some of these opportunities.
Changing market fundamentals: The rise of green steel
Where traditional steel is carbon intensive, green steel utilises clean energy, alternative feeds and furnace designs to decarbonise the steelmaking process.
Downstream processing
As demand for green steel grows, this shift creates significant downstream processing opportunities for Australia – particularly in the development of Direct Reduced Iron (DRI), which reduces the overall energy requirement for steelmaking by using hydrogen instead of coal or gas. DRI also replaces carbon dioxide with water as the main byproduct.
“While there are currently a handful of DRI projects in Western Australia, they are largely internationally owned,” says Paul. “Growing this part of our domestic supply chain will allow Australia to utilise its reserves to produce higher value products, like magnetite pellets and hot briquetted iron (HBI), which is a key component in the production of green steel.”
To attract investment and diversify the steel supply chain, Paul believes that more Australian businesses should invest in downstream processing, particularly in strategic locations like Port Hedland, Geraldton, Whyalla and Port Kembla. “State and federal government recently provide some support to the Whyalla Steelworks in South Australia, which was pleasing to see,” says Paul. “The current partnership between BlueScope, BHP and Rio Tinto to develop Australia’s largest ironmaking DRI-ESF pilot, in Western Australia, is another project that demonstrates the value of these opportunities,” he says.
Magnetite feed
The growth of green steel has also created interest in supplementing traditional hematite feed with magnetite feed. “This type of feed is still high in iron, but it can be sourced at a lower grade in the ground, which aligns with the overall decline in iron ore grades globally,” says Paul. “There is also potential to harness the exothermic energy that magnetite releases during the smelting process, as we saw at Whyalla.”
The main challenge with developing the green steel industry, is being able to offer the market lower carbon steel products in a way that is economically viable and at a premium that people are willing to pay. “Achieving this requires Australia to recognise the economic and environmental significance of green steel and commit to it as a long-term strategy for sustaining both the mining and downstream steelmaking sectors,” says Paul.
Building a diverse commodity portfolio
In addition to iron ore, steelmaking utilises a range of different elements, including manganese, nickel and chromium, to remove impurities, prevent corrosion and improve the workability and durability of steel.
Despite the value of these elements, broader market factors have limited their growth. For example, Nickel is a key component in steelmaking, like Chromium, that is essential for the manufacture of stainless steel – but without a relevant domestic steel industry to drive demand the domestic market for this critical alloying element has largely declined.
Vanadium is another interesting commodity that has been slow to grow, despite a long association with the tool steel making industry. “This very link has kept prices low and limited our ability to start new mines and generate world class supply of this mineral,” says Paul. “Once the broader market recognises that vanadium can also service the exciting but embryonic vanadium redox flow battery (VRFB) markets, prices will come up and we should see more vanadium mines in Australia.”
“There are many advantages to growing Australia’s export market for steelmaking commodities that use our existing shipping routes to service the same international markets. But to achieve this, these and other steelmaking elements must be supported and offered the same economic protections currently extended to iron ore,” Paul continues. “If Australia doesn't begin to invest more strategically in steel, we will lose competitive advantage to the countries that are willing to adopt these technologies, deliver on the approval process and implement targeted incentives.”
Building a strong talent pipeline
To grow Australia’s steel industry, strategic, long-term thinking is needed to deliver on the talent requirement – particularly at senior levels and in key technical disciplines.
“Australia has all of the right ingredients to grow its steel industry, with strong reserves of most commodities that support a diversified steelmaking industry,” says Paul. “But we can still do more to build the talent pipeline that will allow Australia to grow its steel industry and to realise competitive advantage in emerging areas like green steel.”
Pyrometallurgy (the science of smelting) is an example of a specialisation that currently lacks tertiary graduates in Australia, leaving mining companies looking for this talent elsewhere.
“Despite the strategic requirement for this discipline, it is increasingly difficult to attract graduates to low headcount, high-cost courses like this. Yet we have seen ever-growing interest in lower-skilled roles in the mining industries, with high salaries and FIFO lifestyles,” says Paul. “While this is great for employees, we are failing to incentivise smart students to take up many industry-critical and enabling METS style courses like pyrometallurgy and hydrometallurgy. This issue is critical as smart solutions to the processing of these ores and metals will be key to unlocking Australia’s enormous potential in this sector.”
From developing top tier talent to growing new commodity markets and sustainable processing practices, there are diverse opportunities for Australia to grow and sustain its steel industry.
With deep mining industry experience across the steelmaking supply chain, Gerard Daniels’ team of specialist consultants can guide you in appointing senior talent to take your organisation forward – reach out to Paul or connect with your local Gerard Daniels team today.
