Experts have unveiled a groundbreaking new innovation from China that could be devastating for Australia.
China has made a major technological breakthrough that will have Australia on edge in the new year.
One of Beijing’s most respected engineers is the mastermind behind a breakthrough process for flash iron smelting that could end China’s reliance on imported Australian iron ore.
Iron ore is one of the key raw materials for steelmaking, and Australia’s economic success over the past four decades has been largely due to China’s insatiable demand for iron ore.
China is striving to surpass the United States to become the world’s largest economic power and has become the world’s largest steel producer.
Its steel production capacity already exceeds that of all the world’s countries combined – meaning it is unrivalled in key industries such as high-speed rail, shipbuilding and car manufacturing.
To consolidate this dominance, China has imported billions of tonnes of Australian iron ore, mainly from Western Australia’s resource-rich Pilbara region, and paid dearly for it.
This is significant for our economy because China is the largest importer of Australian iron ore by a wide margin. In 2022, Australia exported 736 million tonnes of iron ore to China, accounting for more than 80% of total iron ore exports.
Iron ore exports alone injected $136 billion into the economy in 2023. Every year, it generates billions of dollars in tax revenue, funding critical Australian services.
Chinese steelmakers have been steadily building up inventories at their ports for much of the year.
Exports are one of the only reasons Australia has managed to escape the pain of several global recessions over the past few decades, including the severe financial crisis of 2008.
However, China’s reliance on Australian exports is under threat due to a revolutionary method of making iron that is faster, cheaper and more environmentally friendly.
The new technique, unveiled this week in a new research paper by researchers at the Chinese Academy of Engineering, could reduce processing time from hours to just seconds.
By injecting finely ground iron ore into a super-hot furnace using a rod called a “vortex lance”, a rapid “explosive chemical reaction” occurs, producing droplets of high-purity liquid iron that can be used directly in steelmaking.
This method can increase productivity by 3,600 times compared to traditional methods and is particularly effective for low- or medium-volume iron ore.
The method “can complete the ironmaking process in just three to six seconds, compared to five to six hours in a conventional blast furnace,” the project team, led by Professor Zhang Wenhai, wrote in a paper published in the peer-reviewed journal Nonferrous Metals.
This is worrying for Australia on several fronts.
China is the largest steel producer. Photograph: Chris Ratcliffe/Bloomberg
If flash iron smelting technology is widely promoted, it means that China will no longer need to rely on high-yield ore imports to produce steel.
One of Australia’s selling points is its abundance of high-grade iron ore, which is exactly what China needs right now, as lower-quality ore damages its steel mills and produces inferior steel.
However, with this new method, China would not have to spend a fortune buying high-quality ore from Australia, Brazil and Africa. Instead, the researchers said, China could use the low-grade ore that is abundant within China.
Among other things, the new technology will improve energy efficiency by more than 30 percent and eliminate coal use, significantly reducing carbon emissions — a key long-term goal for Beijing.
To some extent, China has paved the way in reducing its reliance on fossil fuels because it leads the world in building green technologies such as solar panels and wind turbines, but its reliance on coal power and highly polluting steelmaking processes has held it back.
All this means that China has a triple incentive to move away from Australian iron ore – it can save on import costs, have a faster and more efficient way to make steel, and meet its ambitious climate goals by cleaning up one of its most polluting industries.
This groundbreaking technology could spell trouble for Australia.
This breakthrough comes after decades of research and improvements under the leadership of Professor Zhang.
This is not the first time Professor Zhang has caused a stir in China. He previously revolutionised copper production using flash smelting techniques similar to those used in the 1970s.
As a result, China now consumes nearly 60% of global copper production, and Professor Zhang is hailed as a game-changing innovator. He won the first prize of the National Science and Technology Progress Award in 2000 and was elected a member of the Chinese Academy of Engineering in 2003.
However, much work still needs to be done to implement his steelmaking innovations.
The next step is to scale up his method, using a newly designed “vortex lance” that can inject large amounts of ore per hour, potentially producing millions of tons of ore per year.
According to his research paper, his team developed a lance with excellent uniform distribution performance that can inject 450 tons of iron ore particles per hour.
A reactor equipped with three of these lances would produce 7.11 million tons of iron per year. The lances are “already in commercial production,” the newspaper reported”.
“The completion of the laboratory and pilot tests demonstrated the feasibility of the process,” Professor Zhang wrote. In China, the success rate of new technologies that have undergone pilot tests is over 80%, according to government statistics.
It’s been a tough year for miners
It’s already been a tough year for Australian mining companies. Shares of BHP Billiton, the country’s largest miner, have fallen 16.82% since the start of the year. China has at times appeared to be boosting its steel industry with stimulus measures, but it has ended up leaving mills in the lurch.
Australian miners have had a tough year. Image credit: Rohan Kelly
In August, China’s largest steelmaker, Baowu Steel Group, admitted that its Chinese Communist Party shareholders would not introduce a major stimulus package.
The company’s chairman, Hu Wanming, warned that the “winter” of steel demand in China’s troubled construction sector would be “longer, colder and harder than we expected”.
New Year’s Hopes High
However, there were some positive signs in the new year – with shares in mining companies such as BHP Billiton and Rio Tinto soaring on the Australian Stock Exchange on Tuesday.
The optimism was likely driven by positive signs coming out of China.
Chinese President Xi Jinping and other top leaders said on Monday they would adopt a more “accommodative” monetary policy and lay out plans to stimulate the economy next year.
The world’s second-largest economy is struggling with weak domestic consumption, a protracted crisis in its real estate sector and soaring government debt – all of which threaten Beijing’s official growth target for this year.
Leaders are also eyeing a second term for Donald Trump, with the president-elect signaling a return to tough trade policies, fueling fears of a renewed stalemate between the superpowers.
The country’s top decision-making body, the Political Bureau of the CPC Central Committee, held a meeting on Monday to “analyze and study the economic work in 2025,” Xinhua reported.
“We must vigorously promote consumption, improve investment efficiency and comprehensively expand domestic demand,” Xinhua News Agency quoted officials as saying.
They added: “Next year we should .. implement a more proactive fiscal policy and a moderately accommodative monetary policy.
Analysts at SG Markets said it was the first such shift since 2011.
“The Politburo readout .. was correct in every respect, with some decidedly more dovish language and some unusually forthright promises,” they wrote in a report.
Another analyst said the shift “suggests the government recognises the urgency of the economic challenges facing China”.
China hopes to boost its sagging economy in the new year.
The announcement of a big push to boost consumption in the coming year is “another positive signal,” Zhang Zhiwei, president and chief economist at Precision Asset Management, wrote in a report.
Efforts to rebound
Since September, Beijing has rolled out a series of measures aimed at boosting economic growth, including lowering interest rates, removing restrictions on home purchases and reducing the debt burden of local governments.
In October, the central bank announced it had cut its two key interest rates to historic lows.
But as concerns grow about a renewed trade war between the United States and China, economists warn that China’s economy needs more direct fiscal stimulus to boost domestic consumption before it can fully recover to health.
Official data on Monday showed consumer price gains slowed last month, underscoring the continued consumption slump facing China.
The Office for National Statistics said the key consumer price index measure of inflation was 0.2%, down from 0.3 in October.
That was below the 0.4% forecast in a Bloomberg survey of economists. Lu Ting, chief China economist at Nomura Securities, wrote in a note that this week’s meeting is intended to lay out broad guidelines rather than specific policies, “although market expectations are somewhat exaggerated, we do not expect much from this meeting”.
Mr Ding wrote: “China’s economy is not in a normal down cycle due to the real estate collapse, financial crisis and rising tensions with the US, so a true restart of the economy may require a bigger push than the recent ‘bazooka-style’ stimulus package.
— AFP