Australia needs to develop green iron customers beyond China as declining Chinese steel demand and falling iron ore export earnings threaten its mining industry, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA), PV TECH reported.
The energy think tank said converting iron ore into green iron using renewable energy, including solar photovoltaic (PV) power, had shifted from a commercial opportunity to an economic necessity for Australia.
Around 80% to 85% of Australian iron ore exports are shipped to China, where crude steel production peaked in 2020. The Australian federal government expects iron ore export volumes to peak within approximately two years before declining for the remainder of the decade.
Based on these projections, IEEFA estimates that Australia’s iron ore export earnings will fall by AU$44 billion (US$31 billion) in real terms, from AU$123 billion in 2025-26 to AU$79 billion in 2030-31.
“China’s steel boom is over, and Australia’s iron ore outlook is now one of falling volumes and falling prices,” said Simon Nicholas, IEEFA’s lead analyst for global steel.
Western Australia faces particular exposure to the downturn. Iron ore royalties are estimated at AU$8.8 billion in 2025-26, accounting for 81% of the state’s total royalty income. The figure is forecast to decline by AU$1.7 billion in 2026-27.
China’s steel slowdown adds to market pressures
China’s crude steel production fell 3% year-on-year to 500 million tonnes in the first half of 2026, while new construction starts declined by 23.4%, reflecting continued weakness in the property sector.
Chinese steel exports, which reached a record 119 million tonnes in 2025 and supported demand for imported iron ore, fell by 5.6% during the first half of 2026. Meanwhile, the US, European Union, UK, Vietnam and Australia introduced higher tariffs or reduced quotas affecting Chinese steel exports.
Competition from new iron ore supplies is also expected to intensify. The Simandou project in Guinea, with Chinese steelmaker China Baowu playing a leading role on the Chinese side, is ramping up towards an annual production capacity of 120 million tonnes faster than anticipated.
IEEFA noted that S&P Global expects the seaborne iron ore market to remain oversupplied until the mid-2030s, adding to the pressure on Australian exporters.
Against this backdrop, developing green iron production using renewable energy could help Australia diversify its customer base, add value to its iron ore resources and reduce its exposure to a prolonged downturn in China’s steel industry.
