Switched OnGetting Real: Net Zero Isn’t Enough for Fortescue
The world is focused on net zero. Yet some companies, like Australian mining giant Fortescue, have set their sights higher, and are now aiming for ‘real zero’. On today’s show, we bring you an interview from the recent BNEF Summit Shanghai, where Fortescue Founder and Executive Chairman Andrew Forrest sat down with Leonard Quong, BNEF’s Head of Australia Research, to talk about green hydrogen, green iron ore, and why real zero is good for people, the planet and the bottom line.
Today’s episode was recorded live at BNEF Summit Shanghai. To learn more about our Summits and to listen to more interviews, please visit https://about.bnef.com/summit/
This is Tom Rowlands Reese and you're listening to Switched on the BNF podcast, and today we bring you an interview from our BNF Summit Shanghai, which took place on the third and fourth of December. On stage Bloomberg Enief's Head of Australia Research, Lenard Quong, was joined by one of the most recognizable names in metals, mining and now green molecules, the founder and executive chairman of Fortescue, Dr Andrew Forrest. Clean energy and low carbon tech requires the metals and minerals that companies like for Toscu provide, but major miners are finding that their net zero ambitions are under pressure from shareholders seeking to maximize returns. Nevertheless, for Toscu has positioned itself to be both a global metals and green energy company. By twenty thirty, they aim to have their Australian iron ore operations running on green energy, and more importantly, they are looking to achieve this with real zero terrestrial emissions for Scope one and two, while holding a net zero Scope three target by twenty forty. Doctor Forrest discusses how he intends to see these goals come to fruition, while also taking time to discuss it's the economic viability of green hydrogen in a CCS world, and his opinions on global tariffs. Now, let's hear from Lenny's interview with Dr Andrew.
Forrest Nay, Doctor Forest, and welcome to our tenth Bloomberg ne EF Shanghai Summit. It is our pleasure to have you here with us today and this is a conversation I've been looking forward to for quite some time, and I figured what better way to do it than to meet seven thousand kilometers from home in front of seven hundred of my closest friends.
Now, I think most people in this.
Room will know you from your work with Fortescue, where you're a founder executive chairman. You've been operating the company for over twenty years now, congratulations on your anniversary last year, and over that time you've grown Fortescue into the world's fourth largest iron ore company, shipping over one hundred and ninety million tons of product last year and over that period, I think Forest has been the highest returning company on the Australian Stock Exchange and an incredible feat.
But an introduction of you.
As an Australian iron or magnate just seems manifestly inadequate because your company, your portfolio of organizations, you're operational in almost every continent in the world, across a wide variety of commodities and products. On a personal level, you're a philanthropist, you have a doctorate in marine science. You're a climate warrior, a green energy pioneer, a green hydrogen evangelical. You're a jackaroo, son of a jackaroo from a foul, proud family of jaqueline.
Say what that is?
That's an Australian jokes.
Apologies to the translators for that one, but we can google it later on. But amongst all of the long, long list of accolades, perhaps rarest of all, at least in my eyes, is you're a believer in real zero. And that's where I'd love to start today's conversation. Could you tell me what is real zero?
How does it.
Differ from the more conventional I guess you could say net zero?
And why is that the right target for you and for for toescue?
Okay, so let's start with a solution, the.
Solution to global warming and climate change for all future generations, but particular poisoning, atmospheric poisoning for citizens today is the ability to stop burning fossil fuel. If you stop burning fossil fuel, then you gather up everything else like agricultural emissions, etc. You make sure the perfect doesn't get in the road. Is the very, very good, and it is an economically attractive opportunity for every company in the world. It say, Okay, i'll invest the capital to build out my own green energy system. It'll have a lump of capital upfront, but from that point on you'll be saving money every year from not buying fossil fuel, which in Fortescu's case is one third of our.
Operating cost, which is billions.
And so from that point on we're saving around of billion dollars a year on a six billion dollar investment, and.
We save it forever.
So it is a very economic proposition to stop burning fossil fuel. Invest in the equipment you need to do that, amortize it or repay it over ten fifteen years as you like, and you'll find you've created a lot of value for shareholders. Also doing the right thing by your kids and by your fellow citizens.
This is a question within that in historically many have found as a chairman, a board, an executive and certainly as a representative of shareholders, the main priority needs to be those returns.
It needs to be the performance of the company.
And some might find that could come in the absence of doing the right thing for your kids.
As you just said, it sounds like you found a way, and in fact it is the right way to wed those together. You need to do the right thing.
You need to deliver on this decarbonization from a company perspective.
What was that process like for.
You, And perhaps there's advice for those in the room who might want to mirror that level of ambition. How did you convince those stakeholders that this was the right target.
Okay, so there's two things to play here.
One is the absolute certainte of global warming, and that when there is mass death and I'm afraid to say that we've had mass death cumulatively from the impact of humidity on populations who cannot get air conditioning, or extreme floods, fires, et cetera. That the atmosphere is supercharged with moisture and it's hot, and that is of course because of the accelerating heat in the atmosphere. But the bigger question is that the planetary boundaries which absorb carb and go oxside, ocean's land, anything you like. They're starting to reach saturation point at exactly the same time that fossil fuel emissions are going at the opposite direction, accelerating at an accelerating rate. So you know for certain that governments are going to move on this. They're not going to watch their citizens get savagely harmed just because our company's got more lobbyists than someone else. Eventually it'll come down to the people and they'll change governments or they'll change policy. So that certainly is with us, but even more certain for a chief executive, and we can be pretty short sighted, not only more short sighted out there's probably a politician.
That's a joke of my political friends.
But the certainty of the economics of going fully green is obvious now.
The fact that we can build out our systems.
Companies in China can build out their systems and save money, deliver their shareholders, their citizens a low cost and predictable form of energy. And this has really macro implications. If you look at the pre eminence of China's economy centuries ago on a global basis and the rise of other powers, including North America, and you look now out of North America as the largest economy in the world for now staring straight down the barrel of going back to fossil fuel. Now, that's going to peg their economy to what some oligarch or despot or some country who happen to be born just.
By luck on top of an oil deposit.
They're going to peg the prices of energy in North America to the consumer and to the big investors like me. So if I'm looking at a five or six or seven billion dollar project in North America and it's pegged to fossil fuel pricing, and I have to compete around the world, then I know that some oligarch or despots some other place in the world could jack up my energy prices and put it risk that project and the potentially tens of thousands of people I employ just because of that policy. On the other hand, those countries going into renewable energy, I can invest in much more safely because I can see those energy costs both stable and declining over time. And this is a great truth. This will speed the transition. That historic transition which has not happened for centuries, likely to happen comfortably in our generation as one big economic power. China goes renewable energy, tracks investment from all over the world despite tariffs and etc.
Etc.
And countries who stick to fossil fuel, they.
Will slide back and you'll see this economic transition, but it's also a social transition. I have used liberally a colorful description of the fossil fuel sector desk spots, oligarchs.
Countries happen to be like enough to be born on top of an all deposit.
Their authority, which is paramount now, the biggest, most profitable industry in human history. Paramount now is quickly being eroded. The power is going to renewable energy, and that's households, that's companies, that's even governments. They're going to be in charge of their own energy. And these take a while to build out. You can have a sugar hit with AI, you can have a sugar hit with big tech. They're going to come and go, and that technology will be transferable around the world within a couple of years. But building out an energy platform for your economy that takes years and decades, and if you're not doing it, you're going to come badly second.
And sounds like there's real opportunity that democratization of energy that comes from that clean power evolution that we're seeing.
I'd love to come back to the question of where you're.
Seeing the advantages in different markets, particularly here in China. But one of the technologies that you have been principally behind and supportive is green renewable hydrogen, and that's really, in many ways, the step that comes after having that abundance of clean, low carbon, low cost power available.
To you in the market.
What is it in your eyes that makes green hydrogen particularly such a key technology for decarbonization, even in the absence of some of the other talted solutions like carbon capture and storage. What about it is makes it the winner?
Well, capture storage is not a solution.
It's a technical lie waiting for the next idiot to come along to believe it. And that's why companies get tax payers to pay for it, because they basically know it's likely to fail. It does fail nineteen out of twenty times. As a statistician, that's failed. So what you know does work is renewable energy and green hydrogen is if you look at the technology curve of any of these great emerging industries, they start like that.
Now onil and gas is up here.
It's had that huge run er, horizontal drilling, everything you like, better technology, but it's plattered out green. Hydrogen is just here. And of course within a snapshot of time, people say, oh, well it's too expensive, everyone's gone. Don't you realize this war and Ukraine, there's a war in the Middle East. I mean, oh my god, we've got to stick to what we know. That's actually the time to change, and this change is upon us. We're now looking at making hydrogen as fortescut a fraction of what we were a fraction. And when people say, oh, Twiggi's getting out of hygien or he's lost his fam they just don't know me where at the start of this curve, ladies and gentlemen.
And it's going to go like that. Be assured it will follow.
History, and hydrogen costs will come down, I think eventually to the price of transportable LNG, and then there'll be just no reason whatsoever for any government to encourage their citizens to consume an energy which is going to destroy them, which is pumping particularly poisoning into the air today, affecting their health this afternoon, and their children's future forever when they could switch to green hydrogen, that excuse will not be there. So I'm really looking forward to that time that I can ask to see if they'll see me the leadership of the great let's say the great cities of China, which suffers steel mills around them, particular poisoning, and say the technology is there super powerful charging six thousand killer wats an hour, where's the standard is about three to five hundred. Is there charging these huge machines like our trucks inside thirty minutes?
Is there charging a family.
In twenty five seconds that's what we're doing on the racing circuit, ladies and gentlemen right now. Is there making hydrogen as cheap as commercial energy is coming? And so I just advise this all, particularly governments, don't be on the wrong side of history.
You'll be found wanting.
I mean, you've highlighted the Chinese market in particular, and it's something that you've been involved in for quite some time, whether it's investments and partnerships. I think you recently announced a four hundred million dollar deal with XMGC. If I remember rightly, for many of the clean transport components that your mind sights will need that. Over the twenty years that Fortescue has been in business, you've been operating here in China for all of that time, effectively, can I ask you on your views that how have the demands, how the needs of Chinese customers changed over that period and perhaps more pointedly here in twenty twenty four nearly twenty twenty five, is the market ready for the green iron revolution?
That's stick, That is now the time.
So this is the beauty of free trade amongst nations. And if you put barriers around your nation, like big tariffs, it's a sugar hit, but in the end of your country is going to become best competitive. Example, we purchased billions of dollars right now of zero pollution equipment from China and Europe white because China and Europe have settings for their industries to go green, and so their companies are going green and we can buy that equipment.
One thing which Australia can.
Lead in because it just so happens to have the highest radiance on top of the best huge deposits of iron ore, so you've got energy and the molecule together. That is a walk up start to make green iron metal. We're doing green iron ore, and it'll be done by this decade comfortably. But green iron met should also be done by this decade company, and that means that we can combine that historically high energy which is on.
Top of these very.
Very large iron or deposits together make green iron metal. That's where ninety eight percent of the pollution which comes from steel mills around China, India, wherever you like, comes from, is from the conversion of iron ore to iron metal.
After that, it's just steel. It's like making a cake.
You put a bit of cobal to lithium or antimony or this or that. There's fourteen thousand types of stainless and real steel, but it all relies on this ninety eight percent, which is very polluting.
Now, if we can kill that pollution off.
In Australia ship it to those countries which have huge populations where the populations are suffering from that pollution, then it's a wind wind for China, it's a wind wind for Australia, and it's bringing our technologies and our management skills together in partnership.
It is, I think a union which must happen for the good of the world.
And it represents no small disruption to establish trade dynamics that we've built out for decades across the world. But to delve into the question of green hydrogen, I mean, and you've highlighted that people who doubt that you're getting out of the game don't know you. We look at green hydrogen quite extensively. In our forecast to net zero, we found that the world could be producing and consuming about three hundred and fifty million tons of.
It by the year twenty fifty to stay on that trajectory.
But that isn't to say that right now the industry isn't having its problems.
And even at Fortescu, a big.
Proponent, you have pushed out delayed your fifteen million production target of renewable hydrogen beyond twenty thirty.
The question, really, though, is what is the missing.
Piece of the puzzle right now that's preventing hydrogen scaling up in the way that it can that perhaps it should in order for us to get these green products that the world, as you say, needs.
What's missing?
Okay?
So it's a great question. Often with these global complex riddles, the solution is right in front of you and you just miss it. I look at the energy around the world diesel LNG et cetera.
They're not pure.
LNG is ninety five percent methane and the rest is rubbish ethane, et cetera. Why do we produce hydrogen where it's one hundred only that molecule it's so pure, pure in the driven snow. Why do we have this massively powerful energy locked up in this glass? And when we split the oxygen from the hydrogen, it's pure hydphen We just release the oxygen.
It's expensive when you wind back from that thing. Well, does it have to be pure?
What if the impurity is, say, like pure oxygen, which is not difficult because that's where this.
Comes from, hydron oxygen.
If you can tolerate that impurity, which is fine for the environment when you burn it, then you can make hydrogen and a fraction of the cost. And that's what we've started to do. And it is hydrogen an oxygen pure with those elements, but it's not pure hydrohen you. We don't need it to run our turbines, run a run our hydrogen turbines. We don't need that. We don't need it to make ammonia to run our ships, to run our trucks, to run our trains. These are all technologies, these in gentlemen, which are replicable around the world, not.
Just with Fortescue, but everywhere.
And I'm really excited by the fact that the answer was always in front of us, and now we're going to hit it.
It reminds me so much of conversations we were having a bit over ten years ago here in China as the polysilicon production industry moved from the nine end standard for microchips into what became a world leading, world beating forduction of silicon four solar panels, And it was that conversation of how huge do you need it, how expensive.
Does it have to be that was sort of holding you back.
I would love to delve into that for hours on end with you, to pick your brains for longer, but unfortunately we are running out of time. I did have one final question for you. A few months ago, you sat down with some of my colleagues to talk about the ambitions of Fortescue, and you left them with a challenge. You said to them, the next person who sits in this seat, ask them when are you going to stop burning fossil fuels? And you say, say by twenty thirty, give them a big hug. Now, I don't know, but I think we have rules against hugging guests on stage, but.
I don't know if that's true for the audience. So is that a challenge you'd like to put to the audience here today?
In your discussions, ask the people you meet, when do you plan on stop building burning fossil fuels?
Okay, so thank you. That's a great question. So real zero is simply stopping burning foss fuel. Don't worry about carbon sigustration, set off offsets, carbon credits, all that rubbit.
It's all a smoke screen.
You've got temperatures going through the roof, net zero twenty.
Fifty there just has too many excuses in it.
But if you just stop burning fossil fuel, you go real zero, then it's economic for your shareholders. I mean, Forest US not the highest performing company on Australian stugs change history. Because we may make bad economic decisions, we make good ones. It's economic to stop burning fossil fuel. So I challenge every company in China with this question, when are you going to stop burning fossil fuels?
And the answer will be when I.
Fall in love with my shareholders, when I fall in love with my employees, and I act for them because that's when I'll peg a date or stop burning fossil fuel by this date. And I say to the entire world, real zero, stopping burning fossil fueled by twenty forty is economic. It's great for your citizens now, it's great for your kids tomorrow, and it will head off global war real sorry, by twenty forty. Lightest is the challenge.
Doctor Forrest, always a pleasure. Please join me in. Thank you, Doctor Forest for join us today.
Thank you.
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