AUSTRALIA

Fortescue to step up energy spending despite job cuts

Reuters | July 24, 2024 |

Andrew Forrest, Australian billionaire and founder of Fortescue. (Credit: Fortescue Metals Group)

Australia’s Fortescue said on Thursday it will increase spending on its energy division to advance several new green hydrogen projects next year, disappointing analysts who had expected a company restructure to lower its capital outlay.


The world’s fourth-largest iron ore miner has brought its metals and green energy businesses back together after it split them into separate divisions a year ago amid an exodus of senior management that cast doubt on whether the green unit was on track deliver against stretch targets.

Last week, Fortescue announced it would shed 4.5% of its global workforce and said it was unlikely to meet 2030 targets for green hydrogen production. The cuts also come as the price of iron ore, Fortescue’s main profit driver, is forecast to fall back below $100 a tonne.

Fortescue cuts 700 jobs, slows down green hydrogen plans

Analysts said that suggested Fortescue was slowing down the speed of its hydrogen development but on Thursday, it reaffirmed its commitment to the sector.

Its focus will initially be on four projects in Australia, the United States, Norway and Brazil with additional projects in Morocco, Oman, Egypt and Jordan to follow.

Fortescue still plans to boost capital expenditures at its energy division to $500 million, up from initial plans to spend $300 million, and its net operating expenditure to around $700 million next year, up from as much as $500 million anticipated in 2024.

“Good operational performance but market might be marginally disappointed by still high FMG Energy spend in FY25,” analysts at Citi said in a report.

Analysts also flagged a jump in decarbonization spending to $700 million-$900 million for fiscal 2025 from $300 million-$500 million this year as the miner seeks to meet aggressive net-zero targets by 2030.

Shares in Fortescue fell 2.7%, outpacing smaller losses among other Australian miners.

Fortescue plans to raise its focus on producing green iron, or iron produced with a lower carbon footprint, CEO Dino Otranto told a news briefing from China where he has been talking with potential partners for joint projects.

“Pivoting to producing green iron metal is the next step for us, and we see a massive potential in green iron industry out of Australia, supplying China,” he said.

Fortescue plans to produce green iron from its Christmas Creek operations before the end of next year.

The miner forecast higher iron ore shipments for the fiscal year ending in June 2025 and said for the fourth quarter of 2024 shipments of the steel-making material rose 24% from the third quarter to a quarterly record of 53.7 million metric tons.

It now expects to ship between 190 million tons and 200 million tons of iron ore in fiscal year 2025, up from 191.6 million tons shipped in fiscal year 2024.

(By Ayushman Ojha and Melanie Burton; Editing by Devika Syamnath, Alan Barona and Christian Schmollinger)