Aluminum price soars as China cancels tax incentive on exports
The export tax rebate was also removed for copper and lowered for some refined oil, solar, battery and non-metallic mineral products.
The boss of one of the world’s biggest mining companies wants the industry to do more than talk about winning a social licence in an increasingly carbon constrained world. The problem is that his company and others probably won’t like the solutions.
Rio Tinto Chief Executive Jean-Sebastien Jacques told the London Metal Exchange (LME) annual forum on Monday that mining needed to do more on the environmental, social and corporate governance (ESG) front in order to remain relevant and profitable as the world deals with climate change.
“Lots of people are talking about it, but I’m not sure there is action,” Jacques said.
Notwithstanding that Jacques himself was talking about it, he is probably correct that the mining industry, and more broadly the natural resources sector, has yet to fully get to grips with how the industry will look in the next 20-30 years.
But if Jacques and other major miners, such as BHP Group , Glencore and Anglo American, are looking for concrete action, there is one word they should consider. Disclosure.
It’s not beyond the realms of possibility that eventually all products will have to disclose their carbon footprint, similar to the way food is currently labelled to show the breakdown of energy content
But not just any kind of disclosure, rather an unrelenting, complete and determined disclosure that encapsulates the entire spectrum of ESG concerns.
Mining companies should be prepared to fully disclose the exact amount of carbon released for each tonne of material produced, and then go even further by disclosing the amount of carbon generated in turning a raw material such as iron ore into steel.
Jacques talked of a future in which there is an app that would allow consumers to see how carbon was emitted in the production of each product they buy.
It’s not beyond the realms of possibility that eventually all products will have to disclose their carbon footprint, similar to the way food is currently labelled to show the breakdown of energy content, as well as fats, proteins and carbohydrates.
On the social front, mining companies should be prepared to disclose how much each worker is paid in every location in which they operate, and not just direct employees, but also contractors.
This could be compared to the average wage in countries, so that miners could accurately show whether they were paying attractive wages.
Mining companies are generally quite good at promoting social projects undertaken in the communities in which they operate, but full disclosure could show how much the mining companies’ support was compared to the total income of these communities, again allowing a better gauge of the total impact of their operations.
On the governance front, mining companies could push for a global system of full disclosure, so they could see where they fit in against other industries.
They could also push for global carbon pricing and lobby for policies that encourage their industry, and others, to switch to renewable sources of power.
One of the issues raised by various speakers at the LME forum was whether there should be a premium for commodities produced with clean power, as opposed to those that rely on coal-fired energy.
Aluminium is a case in point, with suggestions that the market should be prepared to pay a premium for smelters that use hydropower, or whether there should be a tax on those that rely on coal-fired electricity.
Aluminium is a case in point, with suggestions that the market should be prepared to pay a premium for smelters that use hydropower, or whether there should be a tax on those that rely on coal-fired electricity
These are tricky issues for companies to navigate, Rio Tinto’s Australian aluminium operations being a case in point.
The company’s Bell Bay smelter in Tasmania uses predominantly hydropower, but its Boyne plant in Queensland relies on a coal-fired power plant partly owned by Rio Tinto.
Should companies be encouraged, or forced by legislation, to split their operations into so-called “clean,” or low carbon products, and “dirty,” or high carbon products?
If so, what penalties or incentives should be applied? Should Chinese aluminium or copper exports attract a carbon tax if they compete against “clean” aluminium produced by companies such as Rio Tinto or En+?
The overall point is that there is likely to be considerable disagreement and debate over what is the best path forward for the mining industry and its aim to stay relevant, investable and supported by the wider community in the future.
The risk is that the industry remains mainly talking about the issues and not actually doing that much, or what they are doing is done in a scatter-gun approach that fails to convince the public, investors and the bankers that finance new projects.
Rio Tinto’s Jacques said the industry needs to talk about the costs of doing more on ESG, the trade-offs that may need to be made.
Moving to full and continuous disclosure may be a trade-off worth making in the long run.
(By Clyde Russell; Editing by David Evans)
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