Published by Global Banking & Finance Review®
Posted on August 7, 2025
2 min readLast updated: January 22, 2026
Add as preferred source on GoogleRio Tinto doubts the economic viability of green steel in Australia due to high costs and unproven technology, despite government support.
MELBOURNE (Reuters) -Rio Tinto joined peer BHP on Thursday to play down Australia's prospects of building out a "green iron" sector that would help decarbonise the steel industry because the country lacks the economic incentives to do so.
Australia is the world's largest supplier of seaborne iron ore and has been striving to build a role as a reliable source of green metals. In February the government allocated A$1 billion ($652.4 million) to support the manufacture of green iron and its supply chains.
Since Australia's iron ore is mostly too low-grade to be directly processed into steel with renewable energy, it needs an additional processing step. When this is undertaken with hydrogen made from renewable energy instead of coal, the product is called hydrogen direct reduced iron (DRI) or "green iron", a low-carbon base for making green steel.
"Today I don't believe there is an economic incentive for anybody to move to a hydrogen DRI," Rio Tinto's chief technical officer Mark Davies said.
The technology was unproven, and there were complications moving from existing processes using natural gas to hydrogen, he told a business lunch in Melbourne.
"And doing it in Australia is expensive. It's an expensive place to build stuff," he said.
Major miner BHP said last month it was too costly for Australia to build a "green iron" industry, even after the country and China agreed to jointly work to decarbonise the steel supply chain, responsible for nearly a 10th of global emissions.
A global carbon price of "a couple of hundred dollars" would be needed to create that incentive, Davies later told a press briefing.
($1 = 1.5328 Australian dollars)
(Reporting by Melanie Burton;Editing by Alison Williams)
Rio Tinto stated that there is currently no economic incentive for anyone to transition to hydrogen Direct Reduced Iron (DRI) in Australia.
Australia's iron ore is mostly too low-grade for direct processing into steel with renewable energy, necessitating an additional processing step.
BHP indicated that it is too costly for Australia to establish a green iron industry, despite efforts to decarbonise the steel supply chain.
A global carbon price of 'a couple of hundred dollars' would be necessary to create an economic incentive for transitioning to hydrogen DRI.
Mark Davies highlighted that the technology for hydrogen DRI is unproven and that transitioning from natural gas to hydrogen presents complications.
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