Australian mining executives have been confronted with a distinct downturn. Mining sector share prices have lagged the ASX 200 by more than 30% since October 2023. Iron ore prices have declined to the lower end of forecast ranges, trading at around $95 per tonne as of July 2025, down from $144 per tonne in January. The weakness stems from China’s subdued steel demand amid property sector challenges and weakening steelmaking margins, with China importing over 70% of global seaborne iron ore. Market participants expect continued oversupply pressures to constrain prices through the remainder of 2025.
Faced with this downturn, mining companies navigating working capital constraints while pursuing future capabilities could be turning to alternative financing through firms like EquitiesFirst, which offers financing based on equity holdings.
China’s Role and Australia’s Response
Chinese steelmakers increasingly favor production methods that disadvantage Australian ore quality, since lower-grade iron ore requires substantially more energy and generates over 200 kilograms additional carbon dioxide per tonne compared to high-grade alternatives. China’s steel sector currently relies on coal-burning blast furnaces for 90% of production, yet the first half of 2024 marked the first period since 2020 without new coal-based steelmaking capacity approvals.
In response to growing sustainability concerns, Australia has deployed several policy measures to promote more green metals production. Production credits worth A$2 billion reward aluminum smelters adopting renewable electricity over coal, while the A$1 billion Green Iron Investment Fund backs green iron manufacturing and supply chains, including A$500 million for the Whyalla steelworks transformation. Another A$750 million through the Future Made in Australia Innovation Fund supports pilot programs in hydrogen-based steelmaking and advanced decarbonization technologies. Strategic mining finance specialists have recognized the potential in these government-backed initiatives.
Industry leaders have united around technology development. BHP, Rio Tinto, and BlueScope recently formed the NeoSmelt collaboration to construct Australia’s largest ironmaking electric smelting furnace pilot plant in Western Australia’s Kwinana Industrial Area, with operations planned for 2028. Woodside Energy joined as an equal equity participant and energy supplier, contributing natural gas and hydrogen capabilities. Direct reduced iron combined with electric smelting furnace technology could cut emissions by more than 80% when processing Pilbara iron ore versus traditional blast furnaces.
Global Competition and Technology Gaps
In addition to reduction in demand, Australia has faced expanding international competition in recent years. Middle East producers have also aggressively built direct iron capacity, with companies accounting for significant global DRI production increasingly powered by green hydrogen. Tosyali-SULB announced plans for the world’s largest DRI plant in 2024, targeting 8.1 million tonnes annual capacity with Midrex Flex technology enabling gradual fossil gas replacement with hydrogen. Investment advisory services have noted the competitive challenges facing Australian miners in this evolving landscape.
Meanwhile, Brazil maintains competitive advantages through higher-grade iron ore deposits better suited for green steel production. Guinea’s Simandou projects threaten further iron ore price pressure from 2026 onwards, while delivering the high-grade ore that Chinese steelmakers increasingly favor.
Most Australian iron ore exports contain 56% to 62% iron content, below the threshold that Chinese mills increasingly demand. Higher-grade iron ore is preferred as feedstock for electric arc furnaces and upgrading into DRI for coal-free steelmaking processes.
China’s steel sector evolution presents risks and opportunities for Australian miners. The China Iron and Steel Association projects 30% of Chinese steel production could derive from scrap-based electric arc furnaces by 2035, potentially reducing iron ore imports. Technology transitions also generate demand for higher-grade Australian magnetite deposits suitable for hydrogen-based DRI production. Companies navigating these market shifts could utilize flexible capital structures that global financing solutions provide, enabling access to funds against share holdings without triggering dilution or restrictive debt covenants.
And European regulatory frameworks could accelerate green metal transition timelines. The EU’s Cross-Border Adjustment Mechanism is set to become fully operational by 2026, imposing carbon tariffs on imports based on emission intensity differences between traditional steel mills and EU benchmarks. However, European buyers have historically been reluctant to pay green premiums for cleaner materials.
Capital Requirements Could Drive New Financing Strategies
The investment scale for Australia’s green metals transformation exceeds traditional mining capital programs. Quinbrook Infrastructure Partners’ A$3.5 billion green iron project in Queensland exemplifies emerging multi-billion dollar initiatives across the country. Greensteel Australia’s Newcastle proposal requires A$2.1 billion capital expenditure for a 600MW hydrogen plant, 1.2 million tonne DRI facility, and electric arc furnaces, targeting 2.4 million tonnes of annual carbon abatement.
However, conventional lenders could be more cautious toward green metals investments, citing technology risks and uncertain demand patterns in the context of a shifting international landscape. Alternative financing could become crucial for supporting green metals development in Australia. Innovative equity-backed financing is one potential option, offering financing against equity portfolios for those seeking research and development funding while maintaining near-term operational agility.
South Australia’s magnetite resources could offer clearer near-term potential. High-grade magnetite ores from regions including the Eyre Peninsula can support green iron production using renewable hydrogen, potentially commanding premium pricing.
But commercial green iron production appears unlikely before the 2030s, requiring pilots like NeoSmelt to operate for several years before scaling.
Companies must balance immediate cash flow pressures with long-term positioning requirements. Those accessing patient capital through diverse financing options, including equity-based structures, could position themselves to adjust to this transition while capturing substantial economic opportunities that green metals transformation promises.
