Business · Energy & Commodities · 2 hrs ago
China’s steel shift puts Australia’s iron ore trade at a crossroads
Australia has long supplied iron ore to China, providing around three-fifths of the country’s supply for making steel in blast furnaces.
Now China’s steel demand is weakening, and its government has signalled a shift towards lower-carbon production as it pursues net zero emissions before 2060.
Steel accounts for 15 per cent of China’s carbon emissions, but cleaner electric arc furnace production has grown more slowly than planned.
Australia could keep exporting raw ore, but that may become less useful if China makes less steel or uses fewer blast furnaces.
Another option is to use renewable energy to make green iron, which could help produce steel with near-zero emissions.
Australian green iron projects are still at an early stage, and it is unclear who will fund them or how much China will want to buy.
Australia and China agreed to discuss steel decarbonisation, but those talks have not formally begun.
China’s steel demand is weakening as the country faces growing pressure to decarbonise, putting Australia’s iron ore trade at a crossroads.
Australia has supplied around three-fifths of China’s iron ore, and some Australian miners have earned profit margins of 60 per cent from the trade.
Australia could continue exporting raw ore or develop green iron using renewable energy, but projects to produce it remain at an early stage.
China has recommitted to reforming its steel industry, while the rollout of electric arc furnaces has stalled.
Australia and China signed a memorandum of understanding on steel decarbonisation in December 2025, but formal talks have not begun.
- Who
- Australia and China, including Australian iron ore miners and China’s steel industry.
- What
- Changes in China’s steel sector are raising questions about the future of Australia’s iron ore exports and green iron development.
- When
- The article was published on 12 October 2026. It describes a longer-term shift and recent policy signals.
- Where
- Australia and China.
- Why
- China’s steel demand is declining and the industry faces pressure to reduce emissions, which could change demand for Australian raw iron ore.
This story does not have two clearly opposing sides.
At the end of the day, the bigger question is, does China allow [mining companies] BHP and Rio [Tinto] and Hancock to keep making obscene rates of return if they’re not investing in solutions that China wants?
No business sector sustainably generates 60 per cent returns on capital employed … if there isn’t a perfect moat around your business.
The question is, does Australia want to work with our biggest trade partner to help them deliver on their objectives, or do we want to just stay a dig-and-ship quarry to the world?
Australia has shipped iron ore to China, supplying around three-fifths of its iron ore.
China missed a target for 15 per cent of steel production to come from electric arc furnaces.
Australia and China signed a memorandum of understanding on a policy dialogue about steel decarbonisation.
Australian Prime Minister Anthony Albanese said industry would drive major developments to decarbonise the sector.
The article reported that formal talks under the memorandum had yet to begin.
- Australia’s share of China’s iron ore supply
- Around three-fifths
- Some Australian miners’ profit margins
- 60 per cent
- China’s net-zero target
- Before 2060
- China’s steel emissions
- 15 per cent of the country’s carbon emissions
- China’s missed electric arc furnace target
- 15 per cent of steel production by 2025
- Australia-China memorandum
- Signed in December 2025
Sources
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