The Fortescue Metals Group Limited (ASX: FMG) share price is currently up around 9% as the mining giant shrugs off further declines of the iron ore price.
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What's going on with the Fortescue share price?
Fortescue is currently one of the top performers within the S&P/ASX 200 Index (ASX: XJO), outperforming its large resource peers of Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP), which are up 2.7% and 3.2% respectively.
This is despite the iron ore price continuing its longer-term descent. The iron ore price is currently down to around US$90, with the discount paid for Fortescue's lower grade iron ore widening.
According to some reporting, such as Bloomberg, there is speculation that the Chinese government will help property developers with their cash and debt problems. Banking lending to property developers increased in October.
It has also been reported that Evergrande may have made an interest payment that was due at the last moment according to Clearstream.
However, DMSA claims that it wasn't paid its owed interest and is going to start bankruptcy proceedings against Evergrande.
Hydrogen hopes with Fortescue Future Industries
One part of Fortescue is gaining increasing influence and could cause an impact on the Fortescue share price – Fortescue Future Industries (FFI). It has a vision to make green hydrogen the most globally traded seaborne commodity in the world.
The company has been making various announcements in recent months. It has already allocated US$1 billion of net profit from FY21 for FFI, with it expected to spend US$400 million to US$600 million in FY22.
Fortescue Future Industries has announced the construction of a global green energy manufacturing centre in Gladstone, Queensland. The first stage of development is an electrolyser factory with an initial capacity of two gigawatts.
Another announcement by Fortescue Future Industries has been the signing of an agreement with JCB and Ryze Hydrogen to become the United Kingdom's largest supplier of green, renewable energy. Under a memorandum of understanding, JCB and Ryze will purchase 10% of FFI's global green hydrogen production, which is expected to grow to 15 million tonnes by 2030, accelerating to 50 million tonnes per year in the next decade.
FFI has also partnered with PNG, which it said was one of the most renewable-rich countries in the world, to develop multiple large-scale green energy and green hydrogen projects. A master development agreement (MDA) has been agreed to undertake studies to develop up to seven hydropower projects and 11 geothermal energy projects in PNG. These projects would generate renewable energy for the purpose of producing green hydrogen and green ammonia, creating a "significant" new domestic energy and export industry for PNG.
The most recent announcement that could be factoring into investor thoughts about the Fortescue share price was the link up with LA-based Universal Hydrogen to enable the aviation industry to decarbonise with zero-emissions green hydrogen.
Whilst analysts note all of the different announcements that Fortescue Future Industries is making, investors are hoping for more financial details.
That was most recently reported by the Australian Financial Review. RBC's Kaan Peker said that based on FFI's goal, it could need total capital invested of between US$250 billion to US$350 billion:
For these targets to be achieved, capital allocation towards renewables cannot be constrained by the competition for capital with iron ore assets or the dividend policy.
A new business model for FFI is needed, one which enables growth in renewables. More clarity around this business model is required, in our view.
