China’s greening steel industry signals an economic reality check for Australia
Cristoph Nedopil, Director Griffith Asia Institute, Griffith University Australia has flourished as an export powerhouse for decades. Much of this prosperity has been driven by the nation’s natural endowment with two important raw products for producing steel the traditional way: iron ore and metallurgical coal. Worth more than A$100 billion in 2024, Australia’s iron ore shipments to China make up about 55% of everything we export there. But a transformation has been taking place in China’s steel industry, which is under intense pressure to decarbonise. Earlier this year, Beijing formally expanded its national emissions trading scheme to cover steel production. And just this month, it issued another decree requiring steelmakers to increase their share of green energy in steel production. Prime Minister Anthony Albanese’s recent visit to China may have looked like a celebration of normalised diplomatic or trade ties. Behind the scenes was a quiet but critical economic pivot. Australia’s economic future depends on whether it can green its exports fast enough to meet the decarbonisation needs of its biggest market. A greener China In China, no new permits for coal-based steelmaking appear to have been issued since early 2024. However, China has been approving new, greener steelmaking capacity, using electric arc furnace (EAF) technology, the main low-emissions technology in steel. These furnaces use high-voltage electric arcs, powered ideally by green energy, to melt scrap steel or what’s known as direct reduced iron (DRI). Through that process, they limit carbon emissions by reducing the use of thermal coal for electricity and metallurgical coal for iron making in blast furnaces. In total, China has now installed enough electric arc furnaces to produce more than 160 million tonnes of steel annually. That’s about the same as the total steel output of Japan and the United States combined. China’s current 10% share of steel production from electric arc furnaces still remains below the country’s 15% target. But […]