Orica CEO Sanjeev Gandhi says profiting from green hydrogen still a challenge - The Australian Financial Review

Why BHP’s still bullish on China ore demand

Key Posts
China ore demand strong despite property depression: BHP
Nuclear energy makes no sense for Australia: Schott
Profiting from green hydrogen still a challenge: Orica boss
Energy transition a ‘once in a lifetime business opportunity’
Fortescue ‘may not be for everyone’: Hutchinson
World economy is in a good position: Wikramanayake

Comyn lashes low scrutiny of tech giants’ ‘economic miracle’ returns

Coverage of the Australian Financial Review Business Summit is still underway. The nation’s eminent business leaders are now making their way to summit’s dinner event, which starts at 6.30pm AEDT, where new BCA president Geoff Culbert will be giving his first public speech.

Earlier in the day, Commonwealth Bank chief executive Matt Comyn said local companies are being subjected to significantly more scrutiny than Apple, Meta and Google despite their big margins.

Here’s a preview of the story:

The head of Australia’s largest bank launched a stinging attack on global tech giants such as Apple, saying their “economic miracle” returns and market power were not subject to the same scrutiny applied to local rivals.

In a broadside backed up by former treasurer Peter Costello, Commonwealth Bank chief executive Matt Comyn said while banks and supermarkets got plenty of heat from Canberra for their pricing and profits, there was nowhere near the same level of examination of profit margins and tax contributions of global technology players.
Commonwealth Bank CEO Matt Comyn says big tech companies are the ‘undisputed world champions of Kabuki theatre’. Peter Rae

“I sometimes worry and wonder about the criticisms that are levelled on Australian companies, and particularly large Australian companies,” Mr Comyn told The Australian Financial Review Business Summit.

“One of the things that I find extraordinary is the lack of scrutiny, certainly insufficient scrutiny, across some of the tech companies, in particular, which have large businesses in Australia.”

In 2022, Apple made $12 billion in revenue in Australia but paid only $160 million in taxes, an effective corporate tax rate of 4 per cent, he said. Pointing to the 30 per cent margin on sales via Apple’s App Store, Mr Comyn added that “what is absolutely certain is that is an economic miracle for shareholders”.

Read the full story.

China ore demand strong despite property depression: BHP

Despite significant challenges in the property sector, BHP chief economist Huw McKay is bullish on iron ore demand from China.

“Real estate has shrunk to be a relatively small element in the total steel demand story,” McKay tells the Australian Financial Review Business Summit in Sydney.
Huw McKay says a “wave of electric vehicles” from China will challenge US and European manufacturers. Oscar Colman

“You have to separate the general macroeconomic discourse on China from what’s going on in the sectors that matter most to Australia.

“We had record iron ore imports and consumption in China last year, despite the fact that property was absolutely depressed.

“[Property] is a very big part of the economy, but the other 90 per cent which isn’t property have a very good shot at offsetting weakness elsewhere and having a decent year, as they did last year.”

Elsewhere, McKay says he sees imminent trade tensions over a “wave of electric vehicles” coming from China that will challenge US and European car manufacturers.

Low-cost but high-tech vehicles exported from China will drive down prices for EVs in Western economies, where prices still outstrip petrol versions.

“Consumers will be the winners, but that’s something governments are going to have to wrestle with – where is the balance point between protecting an industrial ecosystem and becoming uncompetitive?”

Nuclear energy makes no sense for Australia: Schott

Kerry Schott, chair of the Carbon Market Institute, says nuclear energy “does not make sense for Australia”, as the opposition flags building large nuclear reactors as part of its mooted energy policy.

“It works for Europe because they don’t have the sun and the wind resources that we have,” Schott says, adding that battery storage to fill gaps when wind and solar are not producing energy is the most cost-effective way to ensure consistent supply.
Kerry Schott, Chair (left), Muqsit Ashraf and Sanjeev Gandhi in Sydney on Monday. Peter Rae

Commonwealth Bank institutional banking executive Andrew Hinchliff says the lender would finance a nuclear project if it made economic sense, and if the moratorium on nuclear energy were lifted.

Orica chief executive Sanjeev Gandhi says he is “agnostic to the source of clean energy” and, as a buyer, he would be “happy to take [nuclear energy]” if the numbers added up.

But Gandhi says the nuclear debate is too long-term to make a realistic impact on the energy transition.

“I think the discussion on nuclear is going to take too long to really ever support the energy mix in terms of making the transmission happen,” he says.

“Let’s focus on what we have at hand, which is solar and wind, to get that done.”

Profiting from green hydrogen still a challenge: Orica boss

Producing green hydrogen is three or four times more expensive than “grey” methods, which means a bigger market for less carbon-intensive energy sources is required, Orica chief executive Sanjeev Gandhi says.
Orica chief executive Sanjeev Gandhi. Tertius Pickard

North Asian buyers have shown interest in green hydrogen but are only prepared to pay a marginal cost premium for the fuel source, so producing green hydrogen at a profitable cost and scale remains a challenge despite government assistance in the form of the $2 billion headstart fund, he says.

“It’s about getting the capital first, and then it’s all about the sustainability of doing business and scaling up production,” he tells The Australian Financial Review Business Summit in Sydney.

Commonwealth Bank institutional banking group executive Andrew Hinchliff says the bank is aware of the risks around new energy sources, but “there’s an enormous opportunity for the country” in the energy transition.

Whether the bank chooses to help finance renewables projects turns on their individual commercial viability, rather than the type of energy.

“We would rather not be ideological on any particular technology or try to pick a single winner,” he says.

Energy transition a ‘once in a lifetime business opportunity’

Policy certainty on electric vehicles and critical minerals strategies is required to get capital flowing towards the energy transition, banking and consulting executives say.

Muqsit Ashraf, Accenture’s global head of strategy, said Australia would need double or triple its current investment level to smooth the way through the energy transition.
Kerry Schott. Michael Quelch

“The energy transition we’re going through at the moment is unlike any other transition we’ve been through before. It’s not just a supply side transition, it’s also a demand side transition,” Ashraf said.

With the right regulation and technology, the transition offered a “once in a lifetime business opportunity”, Ashraf said.

“For Australia, that could equate to multiples of a $100 billion over the coming years.”

Kerry Schott, chair of the Carbon Market Institute, said it was still “early days” for Australia to become a renewables superpower, but the country needed to take advantage of its competitive advantage in wind and solar power.

“Instead of just digging things out of the dirt, which we’re very good at doing, we finally have an opportunity to become an exporter of goods in addition to just simply mining,” Schott said.

Fortescue ‘may not be for everyone’: Hutchinson

Fortescue is a unique place whose culture and values “may not be for everyone”, says Mark Hutchinson, chief executive of the miner’s energy division.

Asked about recent management turmoil at the global energy conglomerate, Hutchison says the changes – in which Fortescue has cycled through nine senior executives in two months – were associated with the company’s transition to a greater focus on green energy.
Mark Hutchinson says the market is unlikely to invest in nuclear power. Petre Rae

“We’ve got to change and evolve. I think things will settle down,” Hutchinson says.

Dino Otranto, chief executive of the metals division, adds: “Eighteen months ago when we announced the pivot into green energy, we were a bit anxious to be honest.”

Weighing in on the opposition’s mooted energy policy, Hutchinson says nuclear power is “not the answer”, and Australia should embrace its pre-existing renewable energy sources.

“Personally, I don’t think nuclear is the solution. We have abundant opportunity for renewable energy and that’s what we should be going after” Hutchinson says.

He backed removing the moratorium on nuclear power, but says the market is unlikely to invest in nuclear power.

World economy is in a good position: Wikramanayake

Macquarie Group chief executive Shemara Wikramanayake says economic indicators are pointing to a soft landing as central banks bring inflation under control and weigh shifting gears from increasing to cutting interest rates.

“Inflation seems to be coming under control and central banks seem to be getting to a point where they can now reduce rates by later this year and deliver that soft landing that really none of us were forecasting,” she tells the Business Summit.

She says Australia’s low levels of government debt and budget surplus make it “well-placed to address some of these cost-of-living issues in terms of industrial relations and tax reforms”.

Europe and Asia could achieve a soft landing, China is rolling out a lot of stimulus to manage the effects of its ageing population and troubled property sector, while New Zealand and Japan have benefited from high global inflation, she adds.

“So the whole world economy looks in quite a good position.”
Shemara Wikramanayake (centre) says Australia is “well-placed to address some of these cost-of-living issues in terms of industrial relations and tax reforms”. Peter Rae

Economy strong despite cost-of-living pressure: Brady

Telstra chief executive Vicki Brady says she’s optimistic about the Australian economy despite persistent cost pressures.

Asked about the health of the economy after a tumultuous four years, Brady says while cost-of-living pressures are affecting consumers, they have not influenced their spending on mobile phone and broadband products.
Vicki Brady says the Australian economy “looks positive”. Peter Rae

“I look at some of that data and forecasts and I think it looks positive as we look forward to Australia,” she tells the Business Summit.

“If I look at the consumer side to start with, connectivity today, I think that that pandemic really brought it to the fore and made it even more obvious and connected.”

She says the telecommunications company is facing its own cost pressures, but understands it needs to invest in the future, particularly in sea-cable networks.

“We’re continuing to see data grow on our network 30 per cent per annum,” she says.

China, SE Asia must reduce reliance on coal: Woodside CEO

Woodside CEO Meg O’Neill says China and South-East Asia must reduce their reliance on coal to help lower global carbon emissions.

O’Neill says Chinese energy consumption in 2023 was 10 times that of Japan and the mast majority of that energy came from coal-fired power.
Woodside CEO Meg O’Neill says Korea and Japan are locking in long-term LNG deals. Oscar Colman

“If the world is going to get serious about tackling climate change, we need China, South-East Asia and all the other nations that are currently quite dependent on coal to make a switch,” she tells the Business Summit.

“The most cost-efficient way to do that is to displace coal with gas on a lifecycle basis at about half the emissions intensity or the same power output.”

She says contracts signed with Korea and Japan are a good indicator of what Asian countries “really think about their future energy mix”.

Korea’s largest gas company, KOGAS, and Japan’s largest energy buyer, JERA, have signed deals for LNG offtake from 2026 to 2036, she adds.

“We have good relationships with customers in those nations and with their governments, who reaffirm the important role gas will play for the long term.”

Energy supply chain more resilient after shocks: O’Neill

Woodside chief executive Meg O’Neill says commodity prices have stabilised after the period of disruption that began during the coronavirus pandemic and was exacerbated by Russia’s war in Ukraine.
Meg O’Neill. lke Meitzel

She says plummeting demand for commodities as a result of the pandemic affected prices in 2020, before Russia’s war in Ukraine and Europe’s response sent ripple effects throughout global markets.

“We saw unprecedented volatility in the prices for all energy commodities,” O’Neil tells the Business Summit.

Countries that historically bought LNG, including India, Pakistan and Bangladesh, were out-competed for that energy source by Europeans and forced to either return to buying coal or suffer blackouts, she adds.

“From a climate perspective, from an energy stability perspective, from a geopolitical perspective, it was not good news,” she says.

Fast-forward to 2023, market dynamics began to normalise and prices stabilised across commodities and have continued to do so despite conflict in Gaza.

“You would have expected that there would be more price disruption because of the activities in the Middle East, but what I think we’re seeing is more resilience in the supply chain,” she says.

“We’re seeing supply and demand pretty well-balanced with enough buffer to be able to reroute around the economy.”

Latest In Federal

Fetching latest articles