Lmeweek: Metals firms 'confused' by ESG regulations but hope for future price premium

Nickel Industries

30/06/2024 15:28

By Mai Nguyen and Siyi Liu
       HONG KONG, June 30 (Reuters) - Executives of metals and
mining firms said this week they are "confused" by the many
different standards on Environmental, Social and Governance
(ESG) and hope there will be price premium for their products if
they meet those standards in future.    
    "There's no unified ESG standard for us to follow," said
Bryce Lee, a director at Zhejiang Huayou Cobalt Co  603799.SS .
"Generally we know the direction, but when it comes to the daily
implementation of the detailed standards, procedures and
assurance processes, we are facing a lot of requests. 
    "This really confuses us. But not only us. Some of the
downstream customers are also confused," Lee told a seminar
hosted by the London Metal Exchange (LME) in Hong Kong on
Thursday.
        Meeting ESG standards is increasingly important for
companies because of growing pressure from their customers,
governments and consumers to reduce harmful behaviour. But those
standards are set by a number of different organisations
globally.
    China-based Huayou operates largely in the middle stream of
the electric vehicle (EV) supply chain and produces chemicals
that go into EV batteries. The company has a large operation in
Indonesia, the world's biggest nickel producer.
    Lee said it is a challenge for companies in the middle of
the supply chain to request their suppliers - the miners - to
comply with ESG requirements from their clients, such as car
makers, because the rules are not always mandatory at the
miners' location.
    
    NO PREMIUM
    Even though Huayou had benefited from a better reputation
for complying with certain ESG regulations, Lee said there is no
premium for lower-carbon EV battery materials.
    "I don't see any pricing credit for people who have done it
or who have the commitment to do it. I hope the market ... pays
a bit more premium for Huayou's minerals like cobalt and nickel
because we do a lot of ESG work," Lee said.
    Huayou is able to reduce up to 90% of carbon emission per
nickel metal ton produced by switching to the High Pressure Acid
Leach process (HPAL), from the Rotary Kiln-Electric-Furnace
process (RKEF), which largely uses coal as the power source. 
    Some 70% of Huayou's HPAL power needs can be sourced from
the waste heat generated by its acid plant, Lee said.
    Indonesia is considering terminating permits for RKEF
smelters.    
    Speaking at the same seminar, Ryan Wen, a sustainability
manager at the International Tin Association, said the main
barriers for his industry in meeting ESG standards include "high
costs, supply disruption risks, lots of misunderstanding ... and
limited practice".
    Muchtazar, a sustainability manager at Nickel Industries
 NIC.AX , said: "Sometimes it is too much, but somehow we have
to identify what is the most important. Meeting these
requirements give us competitive advantage in the present. 
    "For the future, we think the premium in nickel and minerals
will come. We want to be ready when it happens," he told a
separate seminar, hosted by the Shanghai Metals Market, on
Wednesday.

 (Reporting by Mai Nguyen and Siyi Liu in Hong Kong; Editing by
David Holmes)
 ((mai.nguyen@thomsonreuters.com; Reuters Messaging:
mai.nguyen.thomsonreuters.com@reuters.net))