By Anthony Hamilton, Mechanical Engineer and Industry Analyst
Australia’s relationship with China has always been a balancing act between economic dependence and strategic independence. Nowhere is that tension clearer than in our trade of iron ore — the mineral that built both our national budget and China’s skyline.
Imagine, then, a bold decision: Australia deliberately cuts its iron ore exports to China by half and pivots toward domestic manufacturing — especially green steel and renewable-powered industry. What would that mean for our economy, our global influence, and our future as an industrial nation?
The answer is both disruptive and transformative.
The Shock: Short-Term Pain
Let’s be clear: halving iron ore exports would jolt the economy.
Australia exported about 900 million tonnes of iron ore in 2024–25, worth roughly A$160 billion, with China buying four-fifths of it. Slashing that volume by half would pull A$80–90 billion out of export revenue almost overnight. Even if prices spiked 50% amid global shortages, our GDP would still take a hit of 2–3% in the first years — a deliberate, self-imposed economic slowdown.
Western Australia, which lives and breathes the ore trade, would feel it most: reduced royalties, idle capacity, and strained state budgets. Canberra’s tax intake could drop by A$10–15 billion per year in the early phase.
But these are short-term tremors — not structural decline. The question is whether we can replace raw-ore exports with something better: value-added industrial activity on Australian soil.
The Transition: Turning Rocks into Revenue
If half of that diverted ore were converted into green steel, the economic story changes dramatically.
One tonne of steel is worth four to six times more than the same tonne of ore. Even modest domestic processing could create an A$100 billion green industry within a decade — generating thousands of high-skill jobs across hydrogen, renewables, materials science, and engineering.
Projects in Whyalla, Gladstone, and the Pilbara already point the way. With the right investment — perhaps A$60–100 billion over ten years — Australia could build the capacity to supply its own construction, defence, and transport sectors while exporting carbon-neutral steel to the world.
That’s not deglobalisation. It’s smart industrialisation — keeping the value chain at home instead of shipping our competitive advantage overseas.
The Payoff: Long-Term Strength
By 2035, the payoff could be substantial:
- GDP grows larger and more balanced, driven by advanced manufacturing.
- Australia becomes a reliable producer of green steel, battery materials, and hydrogen infrastructure.
- Dependence on Chinese demand declines, while new trade with India, Japan, Korea, and Europe expands.
In this scenario, Australia’s GDP could be 2–4% higher than the business-as-usual case — smaller mining exports, but far greater industrial depth. It’s a shift from volume to value, from being the world’s quarry to being part of its workshop again.
The Risk: A Test of Political Will
Such a move isn’t without risk. China would almost certainly retaliate — delaying other imports, applying political pressure, and exploiting our internal divisions.
The mining lobby would fight hard to protect its margins. Politicians would face the same question every reformer does: why risk the comfortable present for an uncertain future?
Yet the uncomfortable truth is that comfort has bred complacency.
Australia’s prosperity is overly reliant on shipping low-value resources to one buyer. That’s not economic freedom — its dependency dressed as success.
The Opportunity: Building the Next Holden Moment
Half a century ago, Holden symbolised a confident, self-sufficient industrial Australia. Its closure marked the end of that era.
A green-steel renaissance could be the new Holden moment — a chance to reconnect engineering, manufacturing, and national purpose. It would anchor new jobs, restore industrial pride, and ensure that Australia competes not on cost, but on competence.
We’d still dig things up — but we’d also make things again.
Conclusion: A Strategic Rebalance, Not an Economic Gamble
Cutting 50% of iron ore exports to China would be a strategic recalibration, not an act of economic self-harm. It would cost us in the short run, but it could redefine us in the long run — from a resource economy to a resilient, innovation-driven nation.
For decades, Australia’s industrial conversation has ended with one refrain: “We can’t afford to make things anymore.”
Perhaps the truth is the opposite.
We can’t afford not to.
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