LAUNCESTON, Australia, Aug 17 (Reuters) - The sale of a
manganese smelter in Tasmania isn't something that would
normally gather too much attention in the wider world of global
commodities, but it may be a harbinger of a wider move to more
environmentally friendly steel and other metals.
Diversified miner South32 said on Aug. 13 that it
had reached a deal to sell its Tasmanian Electro Metallurgical
Co (TEMCO) unit to UK-based privately-held GFG Alliance.
TEMCO operates four electric arc furnaces that can produce
up to 150,00 tonnes a year of high carbon ferromanganese and
120,000 tonnes a year of silicomanganese.
The deal, subject to approval from Australia's foreign
investment review board, will see the facility change hands for
what South32 termed a "nominal payment" from GFG.
So why would GFG, which operates steel and aluminium plants,
as well as renewable energy operations, want a relatively small
manganese smelter that has been struggling to survive in an
increasingly competitive global environment?
The most compelling advantage for GFG is that TEMCO's plant
is powered entirely by renewable energy.
Tasmania, the island state off mainland Australia's southern
coast, gets all of its electricity from hydropower, wind farms
and residential solar. There is a natural gas-fired power plant,
but it is used only when drought cuts the hydro output, which is
seldom given Tasmania's high levels of rainfall.
GFG Executive Chairman Sanjeev Gupta said TEMCO will help
his Liberty steel group become more integrated across the supply
chain, and also help achieve the company's target of being
carbon neutral by 2030.
Manganese alloy is mainly used in stainless steel
production, and TEMCO's output will fit in with Liberty's steel
operations in South Australia state, where processes are being
upgraded to use mainly renewable energy.
What Gupta is aiming for is the ability to manufacture and
market steel products that are carbon neutral, which would be
vastly different to how most of the world's steel is produced.
"By embracing Tasmania's plentiful supply of renewable
energy, particularly the ability to power the submerged arc
furnaces from Hydro Tasmania, the TEMCO facility will support
our goal to be carbon neutral by 2030," Gupta said in a
statement on GFG's website.
The production of each tonne of steel requires roughly 770
kg of coking coal and more than a tonne of iron ore.
Most iron ore mining uses fossil fuels to operate machinery,
drive conveyors and loaders, and power trains and ships, making
it a carbon-intensive commodity to mine and transport,
especially given the huge volumes shipped to China.
While GFG's Liberty steel is a relatively small player,
being the eighth-largest producer in the world outside China,
the bet seems to be that not only will there be demand for
clean, green steel, but also that it will command a premium.
GFG isn't the only company making an assumption that future
profits will have to be greener. Other miners are looking at
similar moves and the London Metal Exchange (LME) is
investigating launching contracts for metals produced using
lower carbon intensity.
It's still far from certain such green moves will work, or
In some ways, the bet is that the shift to a low-carbon
future will become unstoppable, and that consumers of metals
will switch over to greener commodities.
Whether they are encouraged to do so by customers demanding
climate-friendly products, tax incentives or subsidies, or taxes
on carbon-intensive products remains a work in progress.
Renewable energies got their foothold in global systems
through subsidies initially, but can stand on their own in most
Increased talk of carbon border taxes may also drive
investment in greener commodities.
What GFG has done with buying TEMCO is take a view that the
market will change, gambling that TEMCO's manganese alloy will
eventually enjoy an advantage over similar products produced
with coal-fired power.
(Editing by Tom Hogue)