China's COSCO Shipping Corporation has signed a preliminary agreement with Australia's Fortescue (FMG.AX), opens new tab to jointly build a green fuel supply chain to help reduce pollution from the shipping industry, the Chinese company said on Monday.

The memorandum of understanding includes exploring construction and deployment of green ammonia-fuelled vessels owned either by COSCO or jointly owned by both companies to transport iron ore and other minerals to reduce carbon emissions in the China-Australia iron ore green shipping corridor.

"We are committed to increasing cooperation with global partners to actively promote the green and sustainable development in the shipping industry throughout its life cycle," COSCO Shipping, headquartered in Shanghai, said in a statement on its WeChat account.

"The cooperation marks another big step in decarbonising the shipping industry ... These solutions will be integral to achieving our net zero Scope 3 emission target by 2040," Fortescue, an integrated green technology, energy, and metals company and also known as the world's No.4 iron ore supplier, was cited as saying in the statement.

Fortescue's executives had been in China in recent weeks talking with potential partners for joint projects, CEO Dino Otranto said on July 25.

Fortescue conducted the world's first trial using ammonia as shipping fuel in the port of Singapore, Reuters reported in March.