Australia's FMG identifies renewable hydrogen as its 'what's next?'

Major iron ore producers may be enjoying high market prices at the moment, but they always keep a firm eye on the future. It's a long-term game and investors always want to know what's coming next.

Australia's Fortescue Metals Group, the world's fourth-largest iron ore producer, has been looking for a "what's next?" for several years, and appears to have found the answer: Renewable hydrogen.

The Perth-based company, through its aptly named Fortescue Future Industries, has taken a lead role in staking out a key position in what is expected to become a major Australian export industry.

The company has been busy in December. It has inked agreements to collaborate on renewable hydrogen with Posco, Kawasaki Heavy Industries and Iwatani Corp. As Japan and South Korea are expected to be the major recipients of Australian hydrogen exports, these deals make good sense.

The Posco collaboration could also see Fortescue lift its iron ore exports to the South Korean steel giant.

Fortescue plans to become carbon neutral by 2040, while the larger iron ore producers have 2050 targets.

ESG considerations will play a larger role in the way miners are evaluated by investors, forcing them to speed up their decarbonization efforts.

Technical costs to produce green hydrogen are expected to fall rapidly, and given the growing state and federal government focus on the sector in Australia, hydrogen exports could start well before the 2030 date that most anticipate.

Fortescue is putting itself in a good position to be a significant player when that new trade begins.