May 6, 2024

Steel Market Summary - Australia

The Green Theme Is Gathering Steam

Australia´s second largest pension fund, the $280 billion Australian Retirement Trust, has announced it will stop investing in most thermal coal companies from July onwards. Whilst the decision will not have a direct impact upon the steel industry in Australia, it is nevertheless symptomatic of a wider move towards a low-carbon emissions world: in which the notion of green steel is certainly a part. Australian Retirement Trust has said its portfolio will exclude any company which generates more than 10% of its revenue from the mining and sale of thermal coal, one of the most polluting energy sources. The ban will not apply to metallurgical coal, used in steel making. “As a global investor, Australian Retirement Trust is committed to achieving a net zero greenhouse gas emissions investment portfolio by 2050,” it said in a statement. The decision by the pension fund coincides with another corporate move which says more about the green future than it does about the polluted present. In April, BHP made a $39 billion takeover bid for rival miner, Anglo American. Industry observers have said BHP’s bid is a massive vote of confidence in the future of copper, which is essential to the energy transition given its properties as a conductor and its


resistance to corrosion. Copper will be especially prevalent in electric vehicles. In 2023, Anglo American´s total copper output of 826,000 metric tonnes produced an EBITDA of $3.233 billion, or 32% of the group’s total for the year. BHP’s copper production in 2023 was 1.717 million metric tonnes for an underlying EBITDA of $6.65 billion. In making its takeover bid, BHP is probably also betting on a rally in copper prices as the energy transition accelerates. It´s also worth noting that Anglo American´s metallurgical coal mines in Queensland provide an ideal fit with BHP´s resources portfolio. Through its alliance with Japan’s Mitsubishi, BHP is the world’s largest exporter of metallurgical coal, used primarily to make steel, while Anglo ranks third. Combining their assets would create a hugely influential player in that sector.

Overall, Australia is the world’s biggest shipper of metallurgical coal and the second-biggest exporter of thermal coal, used mainly to generate electricity. The current debate over the use of the fossil fuel in an ever-greening world coincides with an improvement in Australia´s political-economic relationship with China. The world´s biggest steelmaker had imposed tariffs and informal bans on numerous Australian exports after Australia implied China´s culpability in the Covid pandemic. Now, all is forgiven, with the result being that in April, for the first time in more than four years, Australia shipped more coal to China than it did to Japan. Exports of all grades of coal to China were 6.87 million metric tonnes in April, up from 6.83 million in March, according to data compiled by commodity analysts Kpler. Meanwhile, shipments of coal to Japan from Australia in April were 6.10 million metric tonnes, the lowest since April 2017. These global and corporate manoeuvrings are happening at a time when some industries, which are fully dependent on coal in its various forms, declare themselves unable to suddenly abandon the use of fossil fuels. Their argument is that a slow weaning off coal, for example, is an essential part of a business model which allows them to progressively adopt other cleaner sources of energy, whilst remaining profitable. Green steel is an appealing idea that most developed countries warmly embrace – even if the economic pathway to its reality is not yet clear.

Finally, several announcements. A reminder that entries close on May 31st for the 2024 Australian Steel Excellence Awards. Run by the Australian Steel Institute, the awards showcase collaborations and achievements as teams and individuals across the entire steel supply chain, including manufacturers, engineers, designers, builders and many more. Entries must be submitted via the ASI website. State winners will advance to the National Australian Steel Excellence Awards, presented at a gala dinner in Sydney in late 2024. In other news, the Australian Steel Association will be holding its annual conference over three days on Queensland’s Hamilton Island commencing May 19th. Lastly, our companion platform, has just published a special product feature focussing on stainless steel. The market commentary for the feature was written by the Australian Stainless Steel Development Association. To see the feature, click HERE. In June, the entire steel industry in New Zealand will be the special feature subject. So come on Kiwis!