Albanese’s China visit marks a shift: Australia’s export model must adapt to a greener future
Australia’s iron ore and coal exports are out of step with China’s decarbonisation plans. The Prime Minister’s visit this week shows Canberra is recalibrating.
When Prime Minister Anthony Albanese arrived in China on July 12 for a six-day visit, he brought more than a diplomatic agenda. Alongside ministers came leaders from Australia’s key export sectors — education, tourism, and, crucially, mining: Geraldine Slattery (BHP), Kellie Parker (Rio Tinto), Andrew Forrest (Fortescue), and Gerhard Veldsman (Hancock Iron Ore).
At first glance, the visit may appear to celebrate stabilised ties and trade momentum. China now accounts for over 30% of Australia’s exports — about three times more than Japan and five times more than the United States. But the context suggests something else: a response to a growing mismatch between what Australia exports and what China increasingly demands in its green transition.
A decarbonising China has steadily reduced its appetite for coal, iron ore, and gas — commodities that still make up nearly 60% of Australia’s exports.
China’s steel transition: structural, not cyclical
China’s steel industry, the main consumer of Australian iron ore and metallurgical coal, is central to this shift. In 2024, Beijing expanded its national emissions trading scheme to include steel production. In July 2025, it mandated a higher share of green energy in steelmaking.
This is already reshaping capacity. By the end of 2024, China had installed 151 million tonnes per annum (mtpa) of electric arc furnace (EAF) capacity — the dominant green steel technology — and approved another 7.1 mtpa in the first half of 2024 (GMK Center). This capacity exceeds the combined steel output of Japan and the United States.
Meanwhile, Chinese steel demand is falling. With real estate, infrastructure and heavy industry under pressure, consumption is forecast to decline by over 20% this decade (Bloomberg, 2025). And 78% of China’s steel assets will require retirement or recapitalisation by 2030. China is using this window to leapfrog into low-carbon steel production. Since early 2024, no new coal-based capacity appears to have been approved; green steel projects continue to receive policy and financial support (Carbonbrief).
Australia’s exposure: coal and hematite under pressure
This transition threatens two pillars of Australia’s export model: coal and iron ore. Metallurgical coal, essential to blast furnace steelmaking, is increasingly constrained. Thermal coal faces even steeper decline as China scales renewables.
The greater risk is to iron ore. Particularly Western Australia’s hematite ore is poorly suited for EAFs or direct reduced iron (DRI) processes using green hydrogen. Chinese mills are shifting toward higher-grade or pre-processed green inputs.
Australia now faces a choice: adapt its mining and processing systems or risk being structurally sidelined. This is no longer hypothetical. Over the past four years, metallurgical coal exports have fallen by 15%, despite persistent optimism (IEEFA).
To remain competitive, Australia must invest in renewable energy, large-scale storage, and hydrogen-based technologies that convert hematite into hot briquetted iron (HBI) or other low-carbon forms.
One company already moving is Fortescue. It has called for a 75% national emissions reduction target by 2035 and a renewable energy goal of 500% — not just for climate leadership, but to preserve competitiveness. The company itself has committed to net-zero emissions by 2030, without offsets.
But ambition alone is not enough. These investments need long-term demand visibility. The question is: who will buy?
China could build its own green iron capacity using high-grade ore from elsewhere. Alternatively, Australia could remain a long-term supplier — if it offers the right policy conditions and attracts foreign, including Chinese, investment in green energy and processing infrastructure.
The announcement of a new Policy Dialogue on Steel Decarbonisation during the visit is significant. It signals intent to align on standards, contracts, and investment frameworks — not just for iron ore, but for green iron, hydrogen and low-carbon steel.
It is a starting point to tackle with difficult policy questions: What structures and safeguards are addressing concerns for Chinese firms to invest in Australian green energy or mining projects? How can the Australian government ensure long-term investment security against the backdrop of recent decisions through its Foreign Investment Review Board (FIRB) to unwind Chinese investments, such as Northern Minerals? What institutional frameworks are required to underpin long-term contracts — not just for iron ore, but for green iron, hydrogen, or even processed steel?
New instruments may also be needed. One option under discussion involves the creation of green steel certificates — financial products that separate the carbon label from the commodity. These could allow, for instance, Chinese firms to invest in green iron production in Australia and claim emissions reductions, even if the physical material is used elsewhere. Such mechanisms would improve bankability and could reduce emissions associated with long-distance transport.
Much of the public commentary on Albanese’s visit has focused on security and geopolitical signals. But its more consequential message is economic.
As China’s economy is shifting towards green, Australia can no longer assume that demand for coal and iron ore will hold in a decarbonising world. The Policy Dialogue is a start. Filling it with life requires ambition: investment, institutional reform, and long-term contracts that align Australia with the green industries of the future.
Professor Christoph Nedopil is the Director, Griffith Asia Institute.