A new industry briefing has warned that South Australia’s pursuit of a top spot as a world leader in green iron and steel production faces serious risk if it relies on carbon capture technology.
A recently released briefing note by the Institute for Energy Economics and Financial Analysis (IEEFA) cautions that the state’s plan to deploy carbon capture and storage (CCS) at the Whyalla steelworks — currently undergoing a transition to greener processes — could ultimately tie South Australia to high costs and underperforming technology.
The warning comes as the state government weighs CCS as an option to cut emissions while converting to green iron and steel production.
Simon Nicholas, IEEFA’s lead analyst for global steel, argues that while both gas and green hydrogen can play a role in direct-reduced iron (DRI) production, a dependency on gas and CCS exposes South Australia to the same technical challenges and failures that have hindered CCS worldwide.
“The South Australian government cannot fulfil its Green Iron and Steel Strategy using gas with CCUS,” Nicholas said.
“CCUS cannot capture enough emissions to sufficiently reduce iron and steelmaking emissions.”
South Australia boasts globally significant high-grade iron ore reserves, giving it a rare chance to leverage DRI technology for producing iron for both export and domestic steelmaking at Whyalla.
However, Nicholas warns that choosing gas-based DRI and related CCS infrastructure risks excluding South Australia from the growing international market for truly green steel — particularly as some buyers are already willing to pay a premium for genuinely low-carbon materials.
“You can’t make green steel with gas. Adding expensive CCUS in a vain attempt to make iron and steel ‘look green’ will only make it less competitive,” Nicholas said.
“Meanwhile, South Australia would fall behind other countries such as Canada and Brazil, which have truly green iron and steel opportunities based on clean power grids.”
The IEEFA briefing is critical of a recent Infrastructure SA report that advocated CCS for Whyalla as part of a broader state network, arguing that the report overlooks major flaws and exaggerates the competitiveness of gas and CCS compared to green hydrogen-based steel.
“This is not correct – carbon capture’s long track record of low capture rates means it cannot achieve the ~95 per cent emissions reductions of green hydrogen-based steelmaking,” Nicholas said.
“Carbon capture technology has a long history of failure and underperformance across all sectors where it has been applied.
“For iron and steel, the track record of CCUS is poor, and the outlook is very unconvincing.”
To illustrate the issue, Nicholas points to the only commercial-scale CCS plant for steelmaking in the world, operated by Abu Dhabi National Oil Company (ADNOC) in the United Arab Emirates — which is also currently seeking to acquire Adelaide-based gas company Santos.
ADNOC’s Al Reyadah CCS plant manages to capture only 25 per cent of the carbon emissions from its steel operations.
“In no way can the iron and steel produced at this steel plant be considered ‘green’,” Nicholas said.
“Amid growing global competition, getting locked into gas and CCUS will cost South Australia its emerging green iron and steel opportunity.”
