Energy 25 November, 2021 12:00 pm   

Chludziński: Copper is the building block of the energy transition, which is an opportunity for KGHM (INTERVIEW)

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If our product makes the transition possible, we win. Not everyone has this opportunity, some need more support and more patience, while for others this is not an opportunity, but a challenge – explains President and CEO of KGHM Marcin Chludziński in an interview with KGHM has announced that it wants to be climate neutral in 2050, but it mines for copper, which releases a number of different gases into the atmosphere. Does this mean that the face of your company must change completely?

President of KGHM Marcin Chludziński: It doesn’t have to change completely. Like any industrial company, we have two types of emissions. The first is related to emissions in the production process, the other to the energy we use. Our goal is to reduce emissions in both by 30 percent by 2030, and achieve climate neutrality by 2050. We want to continue to mine and produce copper. Of course we generate gases, but at the same time we also produce something on which 70 percent of the energy transformation of Europe and the world is based. So we are doing something that is necessary for the energy transition, while becoming increasingly “greener”.

When it comes to the generation and consumption of energy, we are looking into these issues and taking broad actions. We are considering onshore investments in wind and solar power, as well as offshore installations, and purchasing green power from the widely available grid. In the latter case, we are talking in particular about PPA contracts. The next step is small nuclear reactors, which also completely do away with the issue of emissions related to the energy that we obtain, and I would like to remind you that we are the second consumer of electricity in Poland.

More and more innovative technologies are emerging, giving us the opportunity to reduce our impact on climate and the environment, including on direct emissions. Next year we plan to launch pilot projects involving the use of hydrogen in pyrometallurgy, i.e. in copper smelting. They will mostly result in a drop in CO2 emissions per ton of produced metal. In the future the small nuclear reactors could generate hydrogen, (as a multigenerational effect, in addition to electricity and heat), but let’s say that this is a topic for another conversation. Today, green hydrogen may be produced in the process of electrolysis that uses power generated from renewables. Alternatively, it can be produced from waste heat that remains after the metallurgical process, but in this case we are talking about gray hydrogen.

CO2 capture and storage technologies are also emerging at faster rates. Their growth is facilitated by the raising prices of CO2 allowances in the EU ETS. Moreover, specific regulatory frameworks for underground CO2 storage facilities are being developed. We are already seriously considering the possibility of using these solutions in our production line, alongside the smelters. There are also a lot of technologies that we will have to test at research and development centers, or modify and apply to our own needs. By 2030, we need to take the first step, explore the terrain. Our plan is that by 2050 we will handle of these challenges and get rid of all GHG emissions.

Is the announcement of KGHM’s climate policy a message to the financial market or to the European Union? What is the main purpose of announcing such a document?

The main objective is primarily operational and strategic. We live and function in the regulatory environment in which we operate. We are required to live by this framework and adapt to the EU legal regulations. We are not only taking up the challenge, but by introducing the climate policy we are saying specifically what our objective is. KGHM intends to continuously and consciously pursue its activities in accordance with the principles of sustainable development and responsible business. We will act while taking into account both the impact of the organization on climate, and the impact of climate change on the company.

How can we convince the skeptics who say that we are looking at climate and not at economic development? Maybe these issues can be combined?
This can be combined in the long term with a patient approach. If someone expects the industry to make a big transformation tomorrow or within a year, and go low-carbon or zero-emission, it is impossible. The transition is a process that needs to be spread out across many years. The structural and national funds provide an opportunity to go through this process, and it is also a chance for a certain type of industry. If our product offers the possibility to transform, then we win. Not everyone has this opportunity, some need more support and more patience, while for others this is not a chance, but a challenge.

How will energy prices, which also largely determine the profitability of your business, change?

That’s a question I can’t answer. This depends on a number of parameters, for example the price of CO2 emissions, which are subject to considerable fluctuations depending on the economic situation, and sometimes also on speculation. It is also difficult to predict the price of gas, which has recently risen sharply, or the price of liquid fuels. A lot depends on politics. Much hinges on what is happening in the world in the political and economic dimension. I believe that we should be prepared for higher prices for these elements of the world. We have prepared for them, and will deal with this situation, that is our job. The company sometimes has better macroeconomic parameters, that is, it is able to sell products at a better price. For a few months now we have had a better price, but we are also taking care of our productivity. This year we have produced more in order to benefit from this good price. Without better productivity on such a scale, we would not participate in the consumption of those macroeconomic parameters that are helping us.

What are you preparing for next year with regard to the pandemic?

First of all, we operate according to the principle that the only thing that doesn’t change is the fact that everything changes. Of course, we are happy about the increased demand for our metals, we are happy about being able to produce and sell more, but at the same time we monitor very closely what is happening across the world. I am talking about the pandemic and the macroeconomic situation. I believe that the trend of good prices is a longer trend, but at the same time our job is to be ready for other options. At the moment we are taking advantage of the high demand, taking care of the supply and taking on many strategic projects, the results of which will not be visible this year or next. I am thinking here of small nuclear reactors and issues related to climate policy or new decarbonization projects. We’re working all the time, and we’re opening new doors. The results will be visible in 5, 10 or 15 years. We got by even when prices were very low, for example, in March 2020 a ton of copper cost less than USD 5,000. As you can see, the price hasn’t always been as good as it is now. Still, we had good results. This is what we are focusing on at the moment, for example, identifying trends that can either help us or harm us.

Interview by Wojciech Jakóbik