SYDNEY, AAP – Fortescue Metals Group founder Andrew Forrest says the company will begin building an environmentally-friendly pilot plant this year that could see workers mine iron ore and produce steel domestically.

Fortescue on Friday published its chairman’s speech for the ABC’s Boyer Lecture, which will be broadcast on TV on Saturday.

Mr Forrest said Fortescue produced two million tonnes of greenhouse gas each year and customers wanted to phase out carbon pollution by 2050.

Coal, which produces carbon pollution, is used to power furnaces which help turn iron ore into steel.

“Imagine if we could find a way to make steel without coal, zero-carbon steel, in Australia,” Mr Forrest said.

He said the company was investigating two ways. One would replace coal with hydrogen, made from running electricity through water, to produce steel. Carbon would be added separately to strengthen the steel.

The other method would “zap” iron ore with renewable electricity, without the need for a blast furnace, Mr Forrest said.

Fortsecue will ramp up efforts by building a “green” steel pilot plant this year, he said, followed by a commercial one in a few years in the Pilbara region of Western Australia.

Mr Forrest said if Australia could attract 10 per cent of the global steel market, it could generate more than 40,000 jobs.

Tribecca Investment Partners commodities analyst Guy Keller said he applauded the endeavour, but the 10 per cent target was a lofty ambition.

“It would be extremely difficult to capture 10 per cent of the steel market given how dominant China, Japan, Korea and Taiwan are in steel manufacturing,” he said.

He said Japan had been using hydrogen for years for other purposes, while China was using nuclear power for low or neutral carbon emissions.

Yet Mr Forrest said Australia produced 40 per cent of the world’s iron ore and was in a unique position to produce steel at scale.

Fortescue did not respond to requests for more information before the time of publication.