2024 began with green steel and carbon border adjustment mechanisms (CBAM) as the significant political issue for the global steel and iron ore sector. By early 2025, the Biden administration’s decision to block the proposed acquisition of US Steel by Nippon Steel and the election victory of Donald Trump signalled a new set of industry risks ahead around protectionism, industrial policy, and government intervention.
The supply chain for iron ore and steel spans globally, from legacy mills in the US and EU and their Asian competitors, to iron ore production in Brazil, Guinea, and Australia, to fuel suppliers from Russian coking coal to Saudi hydrogen. Amid growing economic nationalism and evolving US trade protectionism, steel-producing states will increasingly compete for geopolitical and commercial influence over new iron ore suppliers. In parallel, the EU agenda for CBAM and green steel will continue to move forward.
Collectively these forces will directly impact supply chains, pricing, and production, with implications for industry stakeholders already struggling with slowing global demand.
US and EU Protectionism and Sanctions
Steel remains politically sensitive in the US, evident not just in the political controversy over US Steel but also concerning the Trump-Biden tariffs and Section 232 provisions on China which appear likely to be ratcheted up again and expanded in his second term. The blocked Nippon Steel acquisition of US Steel was contentious because it involved a major US ally and because the decision seemed to further reinforce the sense of rising walls and fragmentation in the global economy. The US has not been the leading steel producer for decades, and its 2023 steel production volumes were less than one-tenth of Chinese output.
However, companies like Nucor, CMC, and more recently US Steel itself, have regained competitiveness by adopting mini mill/electric arc furnace (EAF) model. The mini mill/EAF process, sometimes supplemented with new gas based direct reduced iron (DRI) often made in the US allows almost any grade of steel to be made through scrap usage rather than mined iron ore. The process represents a transformative approach to low carbon steel making while remaining competitive particularly in the domestic market, reinforcing its political sensitivity in Washington.
On other trade fronts, the USMCA is supposed to provide open access to the large available quantities of high-quality Canadian iron ore and steel from both Canada and Mexico, but the Trump administration has already threatened 25% tariffs on all exports from its North American partners. Although there are no direct tariffs on Brazilian iron ore imports to the US, Trump has threatened tariffs on Brazil and other BRIC states if they reduce exposure to the US dollar in their trade and investment flows.
Meanwhile, the EU is extending its steel safeguard measures until 2026, imposing a 25% duty on steel imports exceeding the tariff quota. However, these measures focus on finished products, but not raw iron ore, which has seen a 2.3% increase in imports year-over-year in 2024.
Western sanctions following Russia’s invasion of Ukraine have also redirected iron ore trade flows, as evidenced by an 88.2% drop in iron ore exports to the EU in 2023, according to GMK Center estimates. In response, Russia redirected its exports to China, which now receives 90% of its shipments, reports Baltic Exchange.
Green Steel Driving Demand for High-Grade Iron Ore
The global iron ore and steel market is adapting to new sanctions as well as trade and investment restrictions. At the same time, the EU-led shift to green steelmaking is reshaping demand patterns. Green steel production, reliant on natural gas/hydrogen-based DRI , requires high-grade, low-impurity iron ore, elevating its strategic importance. The EU’s CBAM is driving demand for green steel by incentivizing investments in low-carbon technologies like carbon capture and hydrogen.
Beginning in 2026, the CBAM will also reduce the competitiveness of higher carbon-intensity non-EU steel in the EU market and lead those producers to shift those supplies elsewhere or make costly investments in low emissions methods. Wood Mackenzie projects a CBAM-related cost increase of 56% for Indian steel and 49% for Chinese steel respectively by 2034.
Although much of the discussion around green steel focus is on clean hydrogen, the technology also depends on DR-Grade iron ore[i] which currently represents just 5% of the overall iron ore supply globally, creating opportunities for expansion from existing producers like Australia, Canada, Brazil, and Guinea, as well as new entrants. China is playing the leading role among foreign investors in many of these DR-grade iron ore projects, but other steel-producing states are jockeying for a greater role in securing supply.[ii]
Brazil’s Vale, for example, is investing USD 2.7 billion to expand its S11D project in Brazil anticipating strong high-grade ore demand to add 30 million tons annually to the company’s production capacity according to Bloomberg. China has been Vale’s largest market since 2006 and accounted for over 60% of Vale’s total iron ore sales in 2023.
China is also the lead investor in Guinea’s Simandou project which is expected to produce 120 million tons of high-grade ore annually once fully operational by 2025, which could represent up to 4% of global demand by 2030. However, political instability, governance challenges, and underdeveloped infrastructure in Guinea pose risks to its timely development and long-term reliability.
Kazakhstan’s iron ore, mainly magnetite, holds significant potential for Direct Reduction (DR) steelmaking, with major deposits like Sokolovsky and Kacharsky containing over 3 billion tons. Chinese interests are evident through projects like POWERCHINA’s 30-million-ton stripping project, though DR-grade focus remains unclear. The Lomonosovske project, with 74 million tons of DR-grade ore (>67% Fe) expected by 2027, may further attract Chinese investment, but no direct involvement is confirmed.
In Australia, trade tensions with China create uncertainties for projects like the Western Range joint venture between Rio Tinto and China Baowu, which is set to produce 25 million tons annually of 59-62% Pilbara blend iron ore by 2025. The ongoing diplomatic strains between these countries could impact the region’s iron ore trade and production. Meanwhile, South Australia holds abundant magnetite resources that need significant development to realise this potential.
Overall, China’s presence in Guinea, its investments in Kazakhstan , its tensions with Australia, and its deep trading relationship with Brazil signal a “security-first” approach to its iron ore supply, particularly for high-quality resources. This strategy enhances China’s influence over global iron ore prices and complicates access for other major producers, particularly when its formidable economic development and finance capacity through the Belt and Road Initiative is brought to bear. China is also seeking to centralize iron ore purchasing through the China Mineral Resources Group. This centralization, if successful, will further alter global iron ore market dynamics, impacting pricing power and trade flows across multiple countries, not just Australia.
India is watching developments in China’s iron ore and steel strategy closely as it seeks to balance domestic needs and export opportunities. India became a net steel importer in 2022, driven by domestic iron ore shortages despite its large high-quality reserves, economic pressures from rising freight costs and currency fluctuations that strain exporter margins, and policy gaps such as the lack of export duties on low-grade ore. The Indian Steel Association has called for export taxes on low-grade ore and pellets to ensure raw material availability as India targets doubling its steel production capacity to 300 million tons by 2030.
Iron Ore as a Critical Mineral?
Collectively, these trade interventions are creating greater uncertainty about the resilience of global supply chains for low-cost iron ore. Evidence of this is found in the UK government’s decision to designate iron (Fe) as a critical mineral to secure supplies amidst geopolitical tensions, signalling potential market volatility. Canada also added high-purity iron ore to its critical minerals list in June 2024.
The US, by contrast, still considers iron ore supply as adequate and has not included it on its critical minerals or critical materials list. However, other major producers like the EU, Japan, Korea, and India will need to match China’s strategy if they hope to secure supplies of high-grade, beneficiable iron ore. The US steel industry relies more on scrap for EAF production and therefore has less need for primary iron ore.
Conclusion
Steel and iron ore markets will be shaped by the efforts of major steel-producing countries to match Chinese influence over iron ore markets and align with the low carbon agenda driven by the EU CBAM. This will be particularly relevant as demand for high-grade iron ore for hydrogen based DRI production increases. While growing steel scrap use in EAFs may reduce the need for DR-grade iron ore in the long term, major producers like Australia, Brazil, and Guinea will still play a key geopolitical and economic role. DRI and HBI production[iii] complement, rather than replace, scrap recycling. As the steel industry moves toward more sustainable methods, the synergy between scrap recycling and DRI/HBI will be crucial in meeting global steel demand and reducing carbon emissions. In the interim, US steel tariffs under the 2nd Trump administration and the CBAM will redirect trade flows, while economic nationalism and security of supply concerns will limit the role of inbound foreign investment, providing new complexities and political risks for one of the world’s most global and trade-sensitive industries.
Dr. Robert J. Johnston is Senior Research Director at the Columbia University SIPA Center on Global Energy Policy. Kruthika A. Bala is Managing Director for Resources Now Ltd.
