Australia's iron ore miners face falling Chinese demand

Australia's iron ore industry faces challenges as China's steel production peaks, prompting a shift towards decarbonization and higher-grade products.

Australia’s vast iron ore mining sector is facing stark choices as its biggest customer China has likely hit a peak in its steel production and global pressures mount to decarbonise one the world’s most polluting industries.

The scale of these challenges are massive, but not insurmountable, and there are an array of options that Australia’s iron ore miners can pursue.

The trick is choosing a path that maximises profits, and minimises costs, while ensuring the industry continues to prosper.

Australia is the world’s largest exporter of iron ore, the key raw material used to make steel, and it shipped about 930 million metric tons in 2023, which at current prices would be worth about $93 billion.

Australia is also the world’s largest exporter of metallurgical coal, used to make steel, ranks second in thermal coal and in liquefied natural gas, while also being the biggest exporter of lithium and largest net exporter of gold.

But the exports of all these commodities together barely exceed the value of iron ore shipments, underscoring the outsized role of the ore, which is mainly produced in the state of Western Australia.

More than 80% of iron ore exports are to China, which buys 70% of the global seaborne volumes and produces about half of the world’s total steel.