This report is produced in partnership with the Australia China Business Council under its landmark Green Channel initiative. Green Channel highlights the opportunities for Australian businesses arising from increased collaboration with China on outcomes addressing the climate challenge.
Surging demand for exports of iron ore, coal and minerals over the last three decades, much due to China’s growth, has brought significant wealth to Australia. That demand continues apace but there is a growing realisation that Australia must leverage its resource abundance to increase export sophistication.
Adding value to extractions, future-facing minerals needed for clean energy and the electrification of mining operations are all part of the sector evolution. The production of critical materials like steel and cement is undergoing a low-carbon transformation.
Australia’s brightest opportunities are in developing new industries, knowledge, services, products and production methods to serve a net zero world.
The mining sector remains one of the most significant drivers of the trade relationship between China and Australia. Combining forces to reduce the carbon footprint of the ultimate outputs offers potential for productive collaboration.
There is no ignoring the geopolitical context in which decisions are made around investment, capital allocation, technology sharing, joint research and collaboration. Yet there is a need to balance this with the recognition that one of the biggest single challenges to achieving our net zero ambition is the coordination of effort.
In this chapter, we highlight opportunities for collaboration in the mining and resources sector’s global decarbonisation efforts, and in moving Australia’s economy up the complexity ladder.
The transition to future-facing minerals
China produces 70% to 80% of the world’s future-facing minerals. It is also the dominant supplier of a range of technologies which use future-facing minerals as inputs, including smartphones, EVs, rechargeable batteries, solar panels and computers.
For its part, Australia has some of the world’s largest reserves of these minerals, including chromium, cobalt, copper, lithium, nickel and rare-earth minerals. Australia has a category one (high) resource potential in future-facing minerals based on Geoscience Australia’s rating system.
Australia’s ‘shovel-ready’ status and China’s maturity in the future-facing minerals market raise substantial collaboration prospects between the two countries in the effort towards global decarbonisation.
By drawing on the skills, capital and advanced manufacturing practices in countries such as China, Australia has significant opportunities to convert its abundance of mineral reserves to value-adding, domestic refining of future-facing minerals and manufacturing capacity for emerging technologies.
Future-facing minerals include copper, nickel, cobalt, lithium and potash
Emerging technologies including EVs, renewable energy products, low-emission power sources and decarbonising technologies use future-facing minerals as inputs
Demand is rapidly increasing placing intense pressure on supply chains
Bringing Chinese experience to lithium mining in Australia
"Tianqi's first-of-its-kind lithium hydroxide plant demonstrates Western Australia's capacity for downstream processing in the battery value chain. [We are] committed to making sure Western Australia capitalises on its potential to be a world-leading producer of battery-grade materials."
Bill Johnston, WA Mines and Petroleum Minister
Tianqi Lithium Energy Australia (TLEI) is a joint venture between one of the world’s top producers of lithium chemicals for EV batteries, Tianqi Lithium Corporation (51%), and Australian miner IGO Limited (49%).
TLEI established the first lithium hydroxide plant in Australia, which is now the largest processing plant in the world to be built and operated outside of China. The plant has a total capacity of 48,000 tonnes per annum and an operating staff of around 200 people.
In May 2022, almost a decade since the JV was established, TLEI produced its first batch of battery-grade lithium, marking the first-time that battery-grade lithium (lithium hydroxide monohydrate) has been produced in Australia in commercial quantities.
This was hailed as a significant milestone for Australian mining as the sector expands to meet rapidly growing demand for rechargeable batteries, primarily from the EV and renewable energy storage system industries. TLEI will export lithium hydroxide produced at the Kwinana Plant to customers around the globe.
Decarbonisation of mining operations
The mining sector also has a role to play in reducing emissions in its own operations. The mining industry is increasingly committed to a low-carbon future across the value chain and a shared sense of responsibility. Company-specific targets have accelerated industry action.
Significant initiatives and partnerships
Onsite solar farms and battery storage systems
- BHP has partnered with Canada-headquartered TransAlta to build two large-scale on-site solar farms and a battery storage system to help power its Nickel West mines
- BHP has a Power Purchase Agreement with China-based company Risen Energy for the production of solar energy at the Merredin Solar Farm and another with Enel Green Power for the production of wind energy at the Flat Rocks Wind Farm
- FMG’s Chichester Hub operations are powered by a 60MW on-site solar farm following the completion of its Solar Gas Hybrid Project with Alinta Energy in late 2021
Shipping and ‘green corridors’ between ports
- Star Bulk Carriers Corp, Oldendorff Carriers, BHP and Rio Tinto have joined a Global Maritime Forum-led consortium to “assess the development of an iron ore green corridor between Australia and East Asia”, to facilitate a net zero maritime future between major ports
Low-carbon processing
- China Baowu has partnered separately with both BHP and Rio Tinto to reduce its carbon footprint by, for example, looking at low-carbon steelmaking technologies, the use of hydrogen, and the potential for a CCS project at one of Baowu’s largest production sites
Reducing reliance on diesel
Electrifying the haulage fleet or using hydrogen or biofuels has the potential to remove up to 40% of a site’s emissions according to some estimates. Additional benefits would include significant reductions in diesel costs, the potential for better health and safety, and new jobs from transmission infrastructure, servicing and maintenance.
The development of advanced technologies and an increasing willingness of mining companies has resulted in promising projects and collaborations in the transition to EVs such as CORE Innovation Hub. Australia’s first co-working technology and innovation hub, CORE is focused on the energy and resources sector and is providing start-ups, SMEs and industry partners with a platform to collaborate and connect on challenges and opportunities across the industry.
- Major Chinese construction machinery manufacturer, XCMG, successfully delivered 12 100-tonnage electric drive dump trucks to Australia in 2019, the first of their kind designed for mining
- Inner Mongolia North Hauler Joint Stock, a major Chinese mining truck manufacturer, began shipping large-scale battery-electric mining trucks out of China to Yancoal in Australia in May 2021. Approximately nine out of a planned 28 vehicles have been assembled at the Mount Thorley Warkworth coal mine and are undergoing commissioning tests
“As the transition to clean energy accelerates, we’ll need huge quantities of critical minerals – the minerals needed to electrify transport, build batteries, manufacture solar panels, wind turbines, consumer electronics, and defence technologies. That’s where Australia can help. Compared to other major critical mineral suppliers such as China, we’re lagging.”
Associate Professor Mohan Yellishetty, Monash University, in Monash Lens
Mining industry’s collaborative push for solutions
Diesel-powered haul truck fleets are responsible for up to 80% of a mine’s emissions. Electrifying them requires charging systems capable of delivering energy at unprecedented power levels during operations.
This problem prompted the Charge On Innovation Challenge. Launched by BHP, Rio Tinto and Vale in 2021, the challenge aims to accelerate commercialisation of effective solutions for charging large electric haul trucks. It simultaneously demonstrates the desire to collaborate and an emerging market for these solutions in mining.
The challenge invited vendors and technology innovators from around the world and across industries to work with the mining industry on novel electric truck charging solutions.
Initiatives include Ampcontrol and Tritium (Australia) working on a battery swap solution and 3ME Technology on safe, scalable, remotely monitored, reliable battery systems.
The innovators are collaborating with interested mining companies, original equipment manufacturers and investors to accelerate the technology development to support the future roll-out of zero-emissions fleets.
Green steel and other hard-to-abate industries
Producing arguably the single most important resource when it comes to infrastructure, the steel industry faces great challenges in balancing increasing demand against its drive to meet global climate goals.
Iron and steel represent 7% of emissions from the total energy system according to the IEA. This is more than global road freight emissions, and comprises the largest proportion of global CO2 in the industrial production sector.
The global steel industry is aiming to reduce its emissions by at least 50% by 2050, with continuing declines towards zero emissions.
The decarbonisation of steel is extremely difficult and costly. Blast furnace-basic oxygen furnace is the conventional carbon-intensive and most widely used steelmaking process. The Global Energy Monitor estimates the process is behind 60% of global capacity, yet switching from using metallurgical coal as a reductant to using zero-carbon electricity reduces emissions by only 7.4%.
The industry’s decarbonising hope lies more in ‘green steel’: partially substituting metallurgical coal in the process with hydrogen. The use of hydrogen can cut up to 21.4% of carbon emissions per tonne of steel. Together with zero-carbon electricity, this can abate up to 28.8% of carbon emissions.
Green steel is one of the most advanced net zero options for steelmaking that does not use CCUS.
This and other new low-emissions steelmaking initiatives are emerging and maturing. If pilot and demonstration phases prove successful and projects reach commercial scale, the industry will shift closer to major decarbonising breakthroughs.
- BHP has signed a five-year Memorandum of Understanding (MOU) with China Baowu and a three-year MOU with HBIS Group to support the development and operation of low-carbon steelmaking technologies, including the use of hydrogen, blast furnace technologies, CCUS and direct reduction technologies
- FMG, through its Fortescue Future Industries (FFI) business, is moving towards the total decarbonisation of its operations by 2030 using products such as renewable green hydrogen and green ammonia
- Rio Tinto has partnered with the University of Nottingham’s Microwave Process Engineering Group to progress its development and research of the use of sustainable biomass to replace coking coal in the steelmaking process. The project has moved into large-scale testing phases. If successful, there is potential for the technology to reach commercial scale
Urgency needed in the global innovation race
Innovation runs deep in Australia’s mining, energy and resources sectors. Building on this DNA, Australia has an opportunity to establish itself as a leader in the future-facing minerals market and reduce its reliance on the export of bulk, largely unprocessed, commodities.
Recovery from the pandemic provides the opportunity for a transformative agenda that supports greater economic complexity and new exports industries, fit for the challenges ahead.
Australia must base its efforts on its own capabilities and realities, but remain open to collaboration.
There are issues around supply chain resilience and sovereign security. However, as our case studies demonstrate, there remain mutually beneficial strategic partnership opportunities for Australian companies to work with established Chinese partners to secure sustainable, innovative and reliable technologies for a global clean energy future.
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