BHP’s Carbon-Heavy Bid for Anglo-American

ESG Investor

The Australian miner’s attempt to buy Anglo-American has been pitched as a copper deal, but would create a huge coal producer with emissions equivalent to a mid-sized country’s.

Mining giant BHP’s bid to acquire Anglo-American would create the world’s biggest shipper of metallurgical coal and a global mega-polluter, exposing shareholders to stranded asset risk as the world moves away from fossil fuels, a think tank has warned.

This is a particular danger if steelmakers solve the problem of decarbonising steel faster than BHP assumes, and if carbon capture, use and storage (CCUS) – which could extend the life of dirty blast furnaces – fails to take off, the Institute for Energy Economics and Financial Analysis (IEEFA) said.

Australia-based BHP, the world’s biggest miner, offered to buy London-listed Anglo-American last month in an all-share deal that valued the company at £31 billion (US$39 billion). Anglo-American rejected the offer saying it was undervalued, but BHP is expected to increase its offer.

Most commentary has focused on the copper component of the proposed deal, a positive public-relations angle for BHP given the red metal’s central role in the clean energy transition.

But the deal would have a dirty side. Both companies have large metallurgical coal and iron ore divisions, supplying the carbon-spewing steel mills of China, India, Japan and South Korea. Steel is one of the world’s most polluting industries, producing around 8% of global carbon emissions.

Combining the two companies would result in annual emissions of around 490 million tonnes of carbon dioxide equivalent a year, analysis of each firm’s 2023 annual reports shows.

That’s equivalent to the emissions of a mid-sized industrialised country (well above the UK’s total annual greenhouse gas emissions, and about level with notoriously high-emitting Australia). This enormous, hard-to-abate carbon footprint is set to be an ongoing ESG headache for the firm – even as it spins off or shuts down its dirtier mines.

Most of the companies’ emissions come in the form of Scope 3 – emitted by the miners’ steelmaking customers. In BHP’s case, Scope 3 emissions from iron ore represented an eyewatering 283 million tonnes last year (on par with Spain’s total emissions), and from its metallurgical coal about 29 million tonnes. Meanwhile, Anglo-American’s Scope 3 emissions from processing iron ore were 51 million tonnes.

Steelmaking coal still ‘essential’

Iron ore is not intrinsically carbon-emitting. The ore itself contains no carbon, and if alternative methods

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