Australian iron ore could offer Asian steelmakers a potential carbon-cost advantage when supplying products to the European Union, as CBAM calculations increasingly bring the emissions associated with upstream raw materials into focus.
An October assessment by Fastmarkets placed Australia alongside Canada among the countries with the lowest EU CBAM default emissions values for agglomerated iron ore. For 2026, the default value was 0.099 tonnes of CO₂ equivalent per tonne of pellets.
This relatively low default could favour Australian material over supplies from countries assigned higher emissions values. However, the immediate scope for direct Australian exports to Europe is limited by the country’s product mix.
Pellet production limits Australia’s direct exposure
Australia predominantly produces iron ore fines and lump, which fall outside the relevant CBAM category for agglomerated iron ore pellets.
Its pellet production is concentrated in a relatively small number of facilities, including Grange Resources’ Savage River and Port Latta operations in Tasmania.
The more significant commercial opportunity may therefore lie with steelmakers elsewhere in Asia that use Australian iron ore and export finished steel to European customers.
Mills in Indonesia, China and other Asian manufacturing centres already purchase Australian ore. Where the applicable CBAM methodology permits relevant precursor emissions values to be used, sourcing lower-emission pellets can reduce the embedded emissions attributed to downstream steel production.
Precursor emissions create a potential cost differential
Fastmarkets estimated that replacing higher-default Indian material with Australian pellets could provide an illustrative carbon advantage of approximately €32 per tonne of hot metal, under specified assumptions.
The estimate depends on the steelmaking route, the quantities of precursor materials used, applicable carbon prices and the ability to document the supply chain. It does not represent a guaranteed saving for every steel producer.
The potential benefit depends on whether the material qualifies under the relevant calculation methodology and whether the required supply-chain evidence can be provided. A favourable default emissions value alone does not establish the final CBAM liability for a finished steel product.
For Asian steelmakers exporting to the EU, the origin and emissions characteristics of iron ore inputs could therefore become an additional consideration in raw-material procurement alongside conventional quality and cost factors.
Lower-emission raw materials influence mining investment decisions
The potential carbon-cost differential could affect investment decisions involving higher-grade iron ore, pellet feed and processing facilities. Projects capable of supplying suitable materials may become more attractive to steel manufacturers seeking to reduce the emissions intensity of their production.
Mining companies may also consider investment in pelletising facilities, renewable electricity, beneficiation and more detailed emissions accounting as steelmakers place greater emphasis on the carbon characteristics of their raw-material inputs.
For lenders, assessing mining projects may increasingly involve examining not only the quality of mineral reserves but also the emissions intensity of processing and access to customers producing lower-emission steel.
Iron content, transport costs and metallurgical suitability remain essential commercial factors. The potential CBAM advantage adds another consideration for suppliers seeking to serve steelmakers whose finished products enter the European market.
