‘Pilbara Killer’ set to reshape iron ore market

Energy grid overhaul costs hit $128b, coal remains criticalThe Australian Energy Market Operator (AEMO) draft 2026 integrated system plan (ISP) indicates that current strategies may not deliver energy security or climate objectives.The ISP confirms that coal will be required to stabilise the National Electricity Market (NEM) until 2049 — twelve years longer than previously forecast — and transmission cost estimates have increased by up to 100% in real terms.Consistent with previous reports, electricity consumption is expected to nearly double by 2050, driven by electrification of transport, expansion of data centres and industry shifting from gas to electricity. At the same time, two-thirds of the remaining coal fleet would close by 2035, with all due to retire by 2049.AEMO chief executive Daniel Westerman says renewable energy, firmed with storage, backed up by gas and connected with upgraded networks remains the least-cost roadmap to meet Australia’s energy needs.“Extensive stakeholder consultation and modelling of thousands of potential investment combinations has identified the least-cost option,” he said.Consumers will continue to play a major part in Australia’s energy transition, with expected investment in 87GW of small-scale solar, 27GW of behind-the-meter batteries and 9GW of coordinated storage from electric vehicles by 2050.“Australian consumers are world leaders in rooftop solar and are now adding home batteries and electric vehicles,” Mr Westerman said.“If those consumer devices can respond to market signals through their retailers, it will result in a lower cost power system for everyone.”This analysis underscores the need to continue to progress with investments identified in the ISP so the energy transition can deliver the lowest cost outcomes to consumers without placing more pressure on household incomes and industrial competitiveness.“While momentum in investment and delivery continues to build, challenges remain in delivering essential infrastructure at the pace required. Slower progress will erode benefits to consumers and present risks to reliability,” Mr Westerman said.To deliver the least-cost optimal development path (ODP) proposed in the draft by 2050, it would require about 120GW of grid-scale wind and solar, around 55GW of dispatchable storage (including batteries and pumped hydro) and 14GW of flexible gas.A further 6,000km of new transmission lines would also need to be added — a 13% expansion on today’s 44,000km network, but down from the 10,000km stated in the plans 2024 rendition.Since the draft 2024 ISP release, multiple renewables and grid expansion projects across Australia have been scrapped or delayed.In June the Queensland Government walked away from plans to build the $1b Moonlight Ridge wind farm. In October Snowy Hydro ordered the comprehensive review of its $12b Snowy 2.0 pumped hydro project in NSW due to material cost pressures.Future Coal chief executive Michelle Manook says the report challenges the ideology of a “renewables-only” transition.“It confirms that Australia’s current pathway is misaligned with engineering and cost realities, or the original intent of the Paris Agreement,” she said.“Major economies, including Japan, India, China and the US, continue to invest in modern, and increasingly abated, coal solutions across the value chain… Australia has been left behind, while other nations modernise their coal value chains to balance economic and energy security with emissions reductions and sustainability goals.“Climate policies need to reflect engineering reality, not ideology, otherwise Australians will continue to face rising costs, worsening reliability and still fall short of climate targets.”In October, the Queensland Government released an energy roadmap, outlining that coal will continue to underpin affordable and reliable energy supply to the state for as long as needed with gas emerging as a critical technology for system reliability.AREEA chief executive Steve Knott says it’s encouraging to see the Queensland Government acknowledge that reliable, affordable energy still depends on a strong resources industry.“The Government’s commitment to progressing enabling projects like CopperString, unlocking the North West Minerals Province and expanding gas supply means more investment, more production and more high-quality Queensland jobs,” he said.“But the roadmap will only deliver if governments at all levels work together to address logjams in the approvals system and ensure projects are not stuck in bureaucratic limbo, putting Queensland’s competitive edge at risk.How the Queensland Government’s decision to allow state-owned coal power stations to run “to the end of their technical lives” will align with climate targets is yet to be confirmed.In November, the Climate Change Authority (CCA) reported that the pace of emissions cuts would need to triple to meet Australia’s legislated 2035 target of reducing 2005-level carbon pollution by 62-70%.The CCA found the electricity and energy sectors were making the fastest gains — contributing to half the nation’s emissions reductions over the past year — improving the prospects for other sectors of the economy to decarbonise as they electrify.The final 2026 ISP is expected to be released in June next year.

Global lithium demand could exceed 13mt by 2050 under an accelerated energy transition, according to Wood Mackenzie’s latest Energy Transition Outlook for Lithium.The report found that without significant new investment, supply deficits could emerge as early as 2028 as existing supply projects are unlikely to meet demand beyond the mid-2030s.Highlighting the need for sustained investment across the value chain, Wood Mackenzie predicts the global lithium industry requires up to $393b in new investment to prevent the looming supply deficit.In the report, Wood Mackenzie models four energy transition pathways, with lithium demand in 2050 ranging from 5.6mt LCE under a delayed transition to 13.2mt LCE in a net zero scenario.Under the delayed transition scenario, the market will remain adequately supplied until 2037 before entering deficit.Under the country pledges scenario, deficits emerge around 2029, requiring an additional 6.7mt LCE of supply by 2050 to meet projected demand, and under the net zero scenario, deficits are expected to begin in 2028 and persist through mid-century.Wood Mackenzie research director Allan Pedersen says the lithium market is heading into a supply crunch sooner than many industry players may suspect.“Under ambitious climate scenarios, we see deficits emerging from 2028,” he said.“The industry needs to act now should governments progress policies towards Net Zero. Projects approved today will determine market balance in the critical 2030s.”Electric vehicles (EVs) remain the primary driver of demand growth, accounting for 72–80% of lithium consumption across scenarios, according to Wood Mackenzie.The report also noted that rechargeable batteries across all applications account for 96–98% of lithium consumption by mid-century.Wood Mackenzie senior research analyst Rebecca Grant says energy storage systems (ESS) are the sleeper story.“ESS demand grows at 6-7% annually in our forward scenarios as renewables dominate new power capacity and grids require flexibility at scale,” she said.According to Wood Mackenzie, total investment requirements range from about $148b under a delayed transition scenario to $393b under a net zero scenario.Investment is expected to peak between 2030 and 2034, driven by the need for new mining capacity, refining infrastructure and regional supply chains.“The winners will be those who can deploy capital efficiently while navigating trade fragmentation and securing regional market access,” Ms Grant said.Across all scenarios, one conclusion is consistent — lithium is irreplaceable for the energy transition and the industry faces structural supply challenges that require immediate action.“Whether we're on a 1.5°C pathway or something less ambitious, lithium demand will outstrip current supply plans,” Mr Pedersen said.“The question isn't whether we need more lithium. It's whether the industry can mobilise capital fast enough to meet demand while navigating an increasingly fragmented global trade environment.”

The Federal Government is halving fuel excise costs by more than $.26/L for three months to deliver immediate fuel relief to households and industry.The decision follows a meeting of the National Cabinet in Canberra yesterday as part of a coordinated response to as fuel prices surge and supply chains come under pressure due to the escalating conflict in the Middle East.Prime Minister Anthony Albanese says this is the biggest spike in petrol and diesel prices in history.“We're not immune from what has happened with a global price spike that is having a major impact on the global economy,” Prime Minister Albanese said.“There's no country that is immune from the impact of this and the longer the war goes on, the worse the impacts will be.”Alongside broader measures under the national fuel security plan, these measures will play a critical role in keeping exploration and mining operations moving, particularly in regional and remote areas where diesel supply is essential.Association of Mining and Exploration Companies (AMEC) chief executive Warren Pearce says the decision is a direct action that will deliver direct results.“At a time of global fuel shock, cutting the fuel excise in half provides some needed cost relief for industry and households right across Australia,” he said.“This is the kind of accelerating action industry needs and the country needs. It ensures operations can continue and supply chains remain intact for industry and regional economies.”The Federal Government will also reduce the Heavy Vehicle Road User Charge to zero for three months and will defer the next scheduled increase for the charge by six months.“We understand in particular that the heavy vehicle industry is under real pressure,” Prime Minister Albanese said.“For many trucking companies that are small, they rely upon a cash flow which is under pressure… this is about taking pressure off them.”Mr Pearce reports that the AMEC continues to hear that parts of the industry, particularly smaller and independent operators."Those in the service sector are doing it tougher when it comes to accessing fuel," he said.“It is critical that fuel wholesalers do the right thing and ensure supply is reaching all parts of the market, not just the major players.”It is not certain when exactly motorists will see prices changes at the bowser.According to the Australian Competition and Consumer Commission, cost savings were only largely passed onto motorists six-weeks after the previous excise cut was announced, in 2022, due to the way fuel is priced.

Lynas Rare Earths (ASX: LYC) and Japan Australia Rare Earths (JARE) have extended their rare earths supply deal through 2038, locking in a market-linked floor price of US$110/kg for neodymium and praseodymium. Under the revised agreement, Lynas will continue to provide up to 7200tpa of neodymium and praseodymium to Japanese industry, while JARE has committed to purchase 5000tpa under the new pricing structure.If Lynas’ achieved price is above US$150/kg, 30% of the upside above that level, capped at US$10m each calendar year, will be paid to JARE. Lynas chief executive and managing director Amanda Lacaze comments on the agreement. “Lynas’ partnership with JARE has served both organisations well over the past 15 years. It has created a strong foundation for the development of Lynas’ business, supported investments in new processing capacity and new products, and delivered reliable supply of quality product to support Japanese industry growth,” she said. “This new agreement will ensure continued reliable supply of rare earth products that are strategically important to Japanese industry and its global market, and at the same time, the implementation of fair market pricing will reduce price volatility for Lynas and enable continued growth and investment in our operations.” Additionally, 75% of all HRE oxides produced by Lynas will be made available to Japanese industry, with JARE committed to purchasing the equivalent of 50% of all those HRE oxides.