Australia a green metals and energy superpower? Not yet, industry leaders at IMARC 2024 said. The country was more a “latent force”, said McKinsey & Company partner Victor Finkel. But that needed to change quickly.

“I think we have a very real opportunity and we also have a real imperative if we want a prosperous future,” Finkel said.

“Complacency is the enemy here. This is a latent competitive advantage we can turn into something real but it is certainly not a given.

“We talk about this a lot as an opportunity for Australia: green metals, green hydrogen derivatives, critical minerals, etc. I also think there’s a huge imperative for Australia to do this, regardless of how quickly Australia decarbonises. We’re a hugely trade exposed nation. Our largest exports are all deeply linked to fossil fuel emissions in one way or another, whether it’s iron ore and the extractive emissions and then the downstream processing, or whether it’s the next two: natural gas and coal.

“Regardless of the speed at which Australia transitions our trading partners are also transitioning. And the tricky part economically for Australia is that these are also the highest productivity sectors in the economy. The average gross value add per person in the mining sector and oil and gas is about a million dollars per person. And in the next highest in financial services and tech, it’s $300,000.

“So we actually have a real productivity challenge and a national prosperity challenge, unless we can find ways to invest in these opportunities and ride the trends of the transition.”

What does a green superpower look like? A certain command and control economy to Australia’s north is the model despite its many current flaws.

“China is moving a million times faster than we are,” CEO of Climate Energy Finance, Tim Buckley, said.

“China installs 24 gigawatts of wind and solar every month. That’s what they did last month. That’s what they’ve done on average in the last 20 months. We do about six gigs a year.

“So they do in one week what we take a year to do.

“The idea that we’re the superpower is a delusion.

“We’re in a race and we’re not winning it.

“But we do have the potential to be a renewable energy superpower and mining is going to be how we get that.”

Critical to Australia’s ability to leverage historical mineral endowment and mining know-how advantages is preservation of another innate strength, low-cost energy. IMARC heard from miners, metal producers and manufacturers that the country’s challenges with scaling renewable capacity and grid infrastructure required multilateral solutions from industry, government and financiers.

“The cost of electricity has gone up twofold. The cost of gas has gone up fourfold. Labour costs are going up. Productivity is down,” Orica CEO Sanjeev Gandhi said.

“We’ve got all the regulations that we have to fulfil and we have to abate or pay penalties under [Australia’s] Safeguard Mechanism.

“So it’s a perfect storm of challenges and this is resulting in manufacturing in the country getting decimated.”

Orica CEO Sanjeev Gandhi  CEO of The Australian Aluminium Council, Marghanita Johnson, said the answer to any question about Australia’s green superpower credentials was “energy: internationally competitive, reliable, zero emissions, electricity”.

“When we think about the potential we have to be a green energy superpower, I would argue that for parts of our industry we’re already there. We’ve been making green metal in Tasmania for nearly 70 years and we hope to be making it for many more.

“There’s only two things you can buy off the shelf at Bunnings that have gone from mine to market in Australia. Aluminium is one of those.

“What are the three things that we need to be able to achieve our potential? Firstly, energy.

“What attracted companies to Australia historically was internationally competitive energy.

“Australia no longer has that historic advantage. That is very clear.

“Number two, Australia needs to be able to compete for the cost of capital and at the moment we can’t do that.

“And three, environmental approvals. We need an efficient approval system from mine to market that includes approval systems to get our bauxite out of the ground but also approvals for transmission lines to be able to take that energy to our alumina refineries and to our smelters in the future.”

Buckley believes the capital is there.

“We just need the right policy framework,” he said.

“We have got one of the three or four largest capital asset systems in the world. We’ve got banks collectively managing $4 trillion; we’ve got pension monies of $3.5 trillion, which is more than enough capital to poke a stick at.

“It’s about getting the right policies. And I would also argue we need the right pricing signal. Finance is not going to do it for altruistic reasons.

“Governments need to do it for altruistic reasons or strategic reasons.

“We’ve actually got the Capacity Investment Scheme [CIS]. Let’s use what we’ve got. That’s using the federal government balance sheet which is the balance sheet of 26 million Australians … The CIS, the National Reconstruction Fund, NAIF [Northern Australia Infrastructure Facility] and EFA [Export Finance Australia]. It’s all about using the balance sheet of Australia for Team Australia.

“I see green iron as Australia’s single biggest export opportunity.

“We will build probably 10 or 20 or 30 or 50 DRI or green iron facilities in Australia if we get it right.

“The government has to underwrite the first one, the second one; they probably have to underwrite half of the price of the third one. Then get out of the way. And the next 47 will be done by private industry.

“I’m talking about $10 billion of our money, my children’s money, all of our children’s money, because that’ll mobilise an export industry that’s $100 billion a year of pure value-add for the next 50 years.

Margie Johnson (second from left) Victor Finkel (centre) and Tim Buckley (second from right) at IMARC 2024

“And if we don’t do it we will lose the current $130 billion dollars a year of iron ore exports.

“The downside risk for Australia is huge. It’s in the hundreds of billions of dollars a year of exports.

“So when I talk about $10 billion of government capital subsidy I’m all for that. The return to industry is going to be huge. The return to our economy will be huge, but only with government leadership.”

Finkel said Australia was being “watched hotly” by Japan, Korea and Taiwan.

“China is, of course, deeply interested but has many pathways.

“In Japan and Korea in particular we’re seeing steel mills invest into the electric arc furnaces that they will need to process direct reduced iron and not building the direct reduced iron plants themselves.

“They’re clearly expecting to source DRI iron from somewhere.

“When we look at this it still comes back to both the speed at which Australia is moving as people start to sort out the global supply chains and putting down the foundations to do this long term in the bottom half of the global cost curve.

“We can’t build a competitive industry that underpins Australian prosperity if it’s reliant on subsidies forever.

“When we look at what it will take to ensure we’re in that bottom half it’s productivity; it’s the capital productivity with which we can deploy solar, wind and storage, and the productivity with which we can build mines.

“And that is a real challenge for Australia right now.

“To put the cost in perspective when we do our modelling of the levelised cost of delivered green iron, Australia is right in the window to be competitive with the Middle East projects, etc.

“But it’s a knife edge balance.”