Fortescue’s plan to sell customers more than iron ore - AFRThe...

Fortescue’s plan to sell customers more than iron ore - AFR

The company is approaching its goal of cutting its customers’ carbon emissions as a business opportunity. It wants to clean up by helping them clean up. Oct 6, 2021 – 5.00amSaveShareNo doubt Fortescue Metals group chairman Andrew Forrest and chief executive Elizabeth Gaines will be pleased with the pat on the back they received on Tuesday from the Australasian Centre for Corporate Responsibility, which described their plan to eliminated the Scope 3 emissions produced by their customers by 2040 as a “bold and welcome commitment”.But make no mistake – this target isn’t just about reinforcing the miner’s already aggressive environment objectives in an ESG-obsessed world.Elizabeth Gaines, chief executive of Fortescue Metals Group, wants to lead on scope 3 carbon emission reductions. David RoweThis is a money-making plan that would see Fortescue sell technology and green hydrogen developed and produced by its fully-owned subsidiary, Fortescue Future Industries, to its steel-making customers.By helping its customers clean up, Fortescue hopes to clean up for investors too.Fortescue has been hesitant to take responsibility for Scope 3 emissions in the past, but speaking on Tuesday Gaines said the creation of FFI and its focus on green hydrogen had been the catalyst for a change of view.Fortescue Metals Group$14.250 2.44%1 year1 dayOct 20Jan The setting of targets for 2030 (by which time it wants to help cuts its customers’ steel-making emissions by 7.5 per cent) and for 2040 (by which time it wants to reduce customer emissions by 100 per cent) is deliberate; Forrest has been highly critical of fellow miners setting targets to achieve net zero by 2050, and Gaines says, “there’s a growing recognition that setting targets for 2050 is just too late”.There are four key initiatives to drive the reduction: converting Fortescue’s fleet of ore carriers to be fuelled by green ammonia (that is, ammonia produced with renewable energy); encouraging new carriers to be powered by green ammonia; reducing emissions in iron and steel making through the use of renewable energy and green hydrogen; and developing ways to produce iron and cement at low temperatures, using green hydrogen instead of coal.FFI is planning to spend between $US400 million and $US600 million a year researching and developing the technologies that underpin those initiatives. Eventually, that technology, clean energy and green hydrogen will be sold to customers.“We see this as a significant opportunity,” Gaines says.Forrest and Gaines deserve credit for the way they are now approaching the Scope 3 challenge. The pair’s vision for FFI is clearly ambitious and there is a long path to development, but it’s hard to fault the group’s embrace of emissions reduction as a generational business opportunity – the profit motive will hopefully prove powerful.Gaines says FFI’s work will complement the initiatives underway at Chinese steelmakers, pointing out that the big production curtailments across the Chinese steel sector in recent months – which has seen iron ore prices plunge – underscore how serious the sector and the Chinese government is about bringing the steel emissions down.She says Fortescue and most others in the market have been surprised that the iron ore price has fallen so hard, so quickly due to the production curbs, but insists the group remains well-placed to weather market conditions.“The key for us is we’re a very low-cost producer. That’s exactly the position you want to be in.”The country's most expert opinion and analysis.James Thomson