Fortescue pushing hard on hydrogen projects, remains on track for strong year

Fortescue’s first hydrogen shipments are most likely to come out of the US, with its most advanced projects still in the pre-feasibility stage.

Fortescue Metals Group’s most advanced hydrogen projects are still in the pre-feasibility stage, according to renewable energy boss Mark Hutchinson, with the company’s US projects most likely to be the first to produce hydrogen.

Speaking after Fortescue delivered its March quarter production report on Monday, Mr Hutchinson said Fortescue Future Industries (FFI) still planned to make a final investment decision on at least five hydrogen projects in 2023, with the company most advanced in planning for projects in the US.

“In the United States, we are currently looking at projects in Arizona and Texas, which will produce clean hydrogen for the mobility sector,” he said.

“In Brazil, a large scale project will be based on creating green ammonia to export in all probability to Europe. Currently the project is in a pre-feasibility stage and FFI is advancing discussions with our equipment manufacturers.”

Mr Hutchinson also nominated Fortescue’s Gibson Island joint venture with Incitec Pivot in Queensland as a likely candidate for an investment decision this year, along with projects in Norway – where the company has signed a deal for renewable power for its proposed plant – and Kenya.

Fortescue Future Industries CEO Mark Hutchinson

Its Norwegian and Kenyan projects are also still subject to pre-feasibility studies, according to Mr Hutchinson, with only Gibson Island having moved further towards an investment decision.

“I’m pushing the teams hard in places like Brazil, Norway and Kenya, where they’re there in the pre-feasibility stage. And I would very much hope that some of those will get up by the end of the year – not all of them, but some will get up and then we hope that few that miss the deadline will be ready for next year.”

Mr Hutchinson said FFI was working on far more projects than just the five the company has nominated as its most advanced, with some in the US and elsewhere having been put on the fast track.

“We will definitely get there. I’m very confident about it,” he said.

The new disclosures help illustrate the vast scale of Fortescue’s ambition to be producing green hydrogen at the rate of 15 million tonnes a year by 2030, however.

Mr Hutchinson would not be drawn on the likely size of the US and Brazilian facilities, but the company has said it expects its plans in Norway and Kenya to both be 300MW plants. Its proposed plant at Gibson Island will be 500MW, according to previous disclosures.

It takes 50 to 55 megawatt hours to produce a tonne of hydrogen suggesting that combined, the three FFI projects with a scale already announced would produce at most about 180,000 tonnes of hydrogen a year – most likely less, given the output would require running the plant 24 hours a day, 365 days a week.

Fortescue chairman Andrew Forrest at Gibson Island in 2021 with Incitec Pivot CEO Jeanne Johns, centre, and Queensland Premier Annastacia Palaszczuk. Picture: AAP

Even with the most optimistic production levels, however, their total output would be only about 1.2 per cent of the 15 million tonne total required to reach FFI’s ambitious goals.

Fortescue’s main iron ore business remains within sight of an annual production record, however, as the company prepares for the first shipment of magnetite from its Iron Bridge mine in the Pilbara.

Fortescue’s Pilbara operations shipped 46.3 million tonnes of iron ore in the period, down from 46.5 million tonnes in the same quarter of 2022, with costs up 12.4 per cent to $US17.73 a tonne, reflecting the marked cost inflation across the mining sector.

The company’s shipments were down 6 per cent compared to the December quarter, traditionally a strong one for the iron ore sector.

Fortescue said on Monday its Iron Bridge mine produced its first concentrate on Friday April 22, with the slurry pipeline expected to begin delivering concentrate to its Port Hedland shipping operations shortly.

The company received an average $US108.57 a dry metric tonne for its exports in the March quarter, about 87 per cent of the benchmark index for the period.

Fortescue shipped 143.1 million tonnes of iron ore in the first nine months of the financial year, putting it within easy reach of record annual shipments.

In the June quarter of 2022 the company’s Pilbara operations exported 49.5 million tonnes of iron ore. A similar performance in the current quarter would put the company over the top of its 187 to 192 million tonne annual guidance.

While output from Iron Bridge will be a welcome addition to the company’s existing Pilbara operations, adding a high grade feed to either blend or sell directly to its customers, the operations – owned 69 per cent by Fortescue and 31 per cent by Taiwan’s Formosa Steel – has been a costly exercise.

Originally tipped to cost $US2.6bn and deliver first output in mid-2022, Fortescue now says the total cost will be about $US3.9bn – a 50 per cent increase on initial projections.

Fortescue also said FFI had completed construction work at its electrolyser manufacturing facility in Gladstone in Queensland. Installation of the production line and testing facility is yet to begin, however.

Fortescue shares closed down 72c, or 3.4 per cent, to $20.77 on Monday.

Originally published as Fortescue pushing hard on hydrogen projects, remains on track for strong year