Fortescue doubles down on green iron, says green hydrogen market “stuck in limbo”

Andrew Forrest’s Fortescue Metals says it is “doubling down” on its green iron plans in the Pilbara, inspired by “insatiable demand” from China, but also as part of a pivot away from green hydrogen, as high energy prices and unstable politics continue to dog the business case for the renewable fuel.

Fortescue on Wednesday reported its third highest earnings in the company’s history for the 2024 financial year, although at the same time the company’s green energy arm, Fortescue Energy, posted a loss of $US659 million, with spending of more than $US1.2 billion.

The iron ore giant has recently marched back its green hydrogen plans, originally set at 15 million tonnes a year by 2030, but in a media and analyst briefing on Wednesday CEO Dino Otranto said the company was going all in on efforts to produce Australian made green iron, which still include a major green hydrogen element.

“We are really doubling down on green iron,” Otranto told the webast briefing. “What’s become quite evident in in China… is their insatiable demand for green products. And I think Australia is uniquely positioned for its next boom …[in] green commodities. And that’s why we’re putting so much effort into our green iron plants in Christmas Creek.”

Fortescue reported earlier this month that works had kicked off on the $50 million green metals project at its Pilbara Green Energy Hub, with first production anticipated in 2025.

The plant will use green hydrogen produced at Fortescue’s newly completed gaseous and liquid hydrogen facility, the largest of its kind in Australia, together with an electric smelting furnace to produce 1,500 tonnes a year of high purity green metal.

“So within 12 months, we will show the world that it is possible to make green iron metal, so 95% [green metal] plus pig iron, that is in granules out of Pilbara based iron ores, with hydrogen as a reducing agent, derived from the sun and, in the future, the wind,” Otranto said on Wednesday.

“So within a year, you’ll see us making, I think, further announcements around what the next stage of green iron development in Australia or around the world would look like.”

On the Fortescue Energy side of the equation, CEO Mark Hutchinson said his team was still “very much focused on green electrons and molecule production,” and developing other green technologies critical to reduce emissions.

Hutchinson noted that Fortescue’s electrolyser manufacturing plant in Gladstone in Queensland had officially opened earlier this year and had started selling the company’s in-house developed Proton Exchange Membrane (PEM) electrolyser systems.

He says a second green hydrogen project in the pipeline will operate alongside the electrolyser manufacturing center in Gladstone and use Fortescues PEM technology to produce up to 22 tons of green hydrogen per day, starting in 2025.

But Hutchinson and Fortescue’s group CFO, Apple Paget, both stressed during the earnings call that the “potential projects” in Fortescue Energy’s hydrogen pipeline remained subject to final investment decision and dependent on the economics stacking up.

“As I said before, our financial discipline always comes first, and we only focus on delivering those projects which are economically viable,” Hutchinson said.

“The Green hydrogen market, globally, is still developing and, currently, the cost of power in many countries is too high.

“What we won’t do is give up when power costs are prohibitive, we’ll work to bring those costs down longer term. We totally believe that green hydrogen is what the world ultimately needs, and that’s why we continue to maintain a significant portfolio of potential projects.

“There is plenty to be excited about, and we’re focused on making business decisions that make sense economically, commercially, that deliver the best results for our shareholders.”

Asked about the main barriers blocking progress on renewable hydrogen production, Otranto pointed to the need for policy to be set in stone, rather than at the mercy of federal and state election cycles.

“There’s been plenty of announcements … [but] we’re still in a bit of limbo on the definition, and that’s not going to change until probably after the election, and it might be depend on who gets in.

“And it’s the same, you know, with other places around the world, it’s just making sure that the legislation gets locked in.

“So I think, you know, watching that space is going to be important. And then the buyers are also, you know, looking at those markets to see, see what happens.”

Hutchinson says it mostly down to energy costs, which in Australia at the moment are feeling the effects of both wobbly politics and a market in transition – or, as David Leitch explains here, an outdated market design that is not making the most of the cheap cost of renewables.

“The cost of power will change over time – once the economy decarbonises and there is excess power available for export, which is really what green hydrogen is,” he told the briefing.

“So I think, you know, I look at the Australian market, there’s definitely a long term market. It’s going to take some time to adjust, but it does mean that there are opportunities… outside [Australia’s National Electricity Market], if we can get the power cost down.”

On green iron, meanwhile, Otranto says the company is testing a number of different paths to get there, including “looking around the world” to where renewable energy costs are low enough to support green iron production.

“But our first step is proving the technology with the lower to mid-grade hematite out of the Pilbara, because that is the step that really hasn’t been done yet.

“Economically right now, the green iron projects around the world utilise a very high grade (iron), and there’s not many places around the world that actually produce that.

“So the world needs to solve [the problem with] low- to mid-grade iron ores. And for Australia, where we hold a preeminent position in this space, we see endless opportunities to develop a green iron metal industry here in Australia,” Otranto said.