Fortescue Metal Group chairman Andrew Forrest says his company is considering possible investments in renewable energy amid the transition in China's economy.
"We are incredibly interested in lithium, graphite, copper. We are incredibly interested in renewables, in the recycling of nuclear waste," the iron ore billionaire said in an interview at the Boao Forum for Asia in Sanya, China. "But will we charge off in there without incredibly serious thought? No."
Looking for new revenue streams in face of the iron ore rout: Fortescue founder Andrew Forrest.Credit: Philip Gostelow
Fortescue, the world's fourth-biggest iron ore producer, is considering diversification as China's decades-long infrastructure investment boom fades, cutting prices fo iron ore - its only source of revenue. Lithium and graphite are minerals used in batteries for electric cars, while renewables include solar, wind and tidal power generation.
The iron ore price has dropped more than 70 per cent from its peak in 2011 amid weakening Chinese demand and a ramp up in supply.
Producers of lithium raw materials have surged in recent months as supply fails to keep pace with demand and on expectations of a boom in the production of electric vehicles. China's government has pledged to promote new energy vehicles by subsidising producers, speeding up construction of charging stations, and setting quotas for new energy cars in the vehicles bought by public bodies.
Fortescue won't move into these sectors "until we're absolutely certain that we are looking at something that will be another iron ore industry," Forrest said. "We're not going to bet our employees' futures on a whim, so that discipline stays."
Fuel emissions
Spending on renewable energy projects grew 4 per cent to a record $US329.3 billion ($431.6 billion) last year, spurred by global regulations designed to curb fossil-fuel emissions. From 2015 to 2024, the market to supply lithium ion batteries for light vehicles may total $US221 billion, according to Navigant Consulting.
Even as China's economy shifts toward the consumer, Forrest sees continuing demand for iron ore, he said. Fortescue this month surprised the market announcing an accord with Vale, the world's biggest producer, to create joint ventures to blend their ores and an option for the Brazilian company to take a stake of as much as 15 per cent in the company.
The deal isn't a way of selling down his own stake, Forrest said. He's Fortescue's largest shareholder, owning about a third of the company.
"The reality is that iron ore will continue to stay strong, demand will continue to stay strong," Forrest said Tuesday. "Volumetrically, we are experiencing month-on-month growth, which is records each month. If America, Britain or Australia had anywhere near Chinese growth we'd be popping champagne."
Bloomberg