Hydrogen Economy – Fortescue job cuts, 700, come ahead of expected spending ramp up on decarbonisation.
Fortescue’s (FMG.AX), opens new tab shares slipped on Thursday following news of sweeping job cuts across its metals and energy divisions and a slowdown in the development of its green hydrogen business.
The world’s fourth-biggest iron ore miner embarked on a major expansion in late 2020 to turn itself into a green energy giant, based on a view that hydrogen from renewable power sources would become a major source of green energy.
But with power prices in Australia remaining high and strong demand yet to take shape, Fortescue will cut about 700 jobs, or 4.5% of its global workforce.
It was unlikely to meet a production target of 15 million tonnes of green hydrogen by 2030, a spokesperson told Reuters on Thursday.
“We are very committed to green hydrogen, but we probably are not going to get there,” she said. “That really comes down to the price of power and policy settings here in Australia.”
However, Fortescue remains committed to its green hydrogen projects overseas, in Norway, Brazil and Arizona, she said.
Fortescue shares fell 1.6%, while peers BHP (BHP.AX), opens new tab and Rio Tinto (RIO.AX), opens new tab fell less than half a per cent.
Glyn Lawcock, Barrenjoey analyst, said:
I don’t think the market ever believed that target was achievable, but there were worries they would overspend.
Fortescue has guided a cumulative spend of $6.2 billion to meet its decarbonisation targets by the end of the decade, but has only spent around $300 million per year so far, which suggests it must step up its spending, he said.
It will also have to spend more on sustaining capital and on its Iron Bridge magnetite project, analysts said.
As such, reduced headcount may relieve investors’ concerns about capital and operating expenditure in the next financial year, Lawcock added.
Fortescue has aggressive decarbonisation targets of zero direct and indirect emissions by 2030 and achieving carbon neutrality including the emissions of its customers by 2040.
The company has diversified away from its main business of iron ore as new supply from Guinea’s Simandou and other regions from next year is expected to drag on iron ore prices.
Macquarie expects iron ore prices to fall to an average of $103 next year and $85 in 2026 from $120 this year.
Fortescue will report its quarterly production on July 25 and its full-year results on Aug. 28.
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Hydrogen Economy – Fortescue job cuts, 700, come ahead of expected spending ramp up on decarbonisation. source
