Australian mining company Fortescue Metals Group (FMG.AX) has announced sweeping job cuts across its metals and energy divisions, as it slows the development of its green hydrogen business due to high power prices in Australia and a lack of strong demand.
Fortescue, the world’s fourth-biggest iron ore miner, had embarked on a major expansion in late 2020 to transform itself into a green energy giant, based on the view that hydrogen from renewable power sources would become a major source of green energy. However, the company now says it is unlikely to meet its previous production target of 15 million tonnes of green hydrogen by 2030.
The company will cut around 700 jobs, or 4.5% of its global workforce, due to the slowdown in its green hydrogen plans. A Fortescue spokesperson cited the high power prices in Australia and the lack of strong demand as the main reasons for the reduced targets and job cuts.
Despite the setback in its green hydrogen plans in Australia, Fortescue remains committed to its green hydrogen projects overseas, in Norway, Brazil, and Arizona.
Analysts have noted that the market never fully believed Fortescue’s ambitious green hydrogen target was achievable, and there were concerns the company would overspend on the initiative. The job cuts and slowdown may help alleviate investor concerns about Fortescue’s capital and operating expenditures in the next financial year.
Fortescue has aggressive decarbonization targets, aiming for zero direct and indirect emissions by 2030 and achieving carbon neutrality, including the emissions of its customers, by 2040. The company has been diversifying away from its main iron ore business as new supply from regions like Guinea’s Simandou is expected to put pressure on iron ore prices in the coming years.