Mining Equipment Makers Bet on Hydrogen as the Future of Energy
Owing to the growing awareness regarding the risks of climate change, organizations globally are fervently working toward a reduced-carbon future. In sync with this, Caterpillar Inc. CAT recently announced that it will begin offering 100% hydrogen fueled generator sets from late 2021. The company will also commence roll out of power generation solutions that can be configured to operate on natural gas blended with up to 25% hydrogen. This is part of its ongoing efforts to help customers achieve their climate-related goals by providing products, which facilitate fuel transition, increase operational efficiency and reduce emissions. It is worth mentioning that Caterpillar’s Solar Turbines gas turbine generator sets have been running on high hydrogen blends for decades and are capable of operating on 100% hydrogen today.
The mining industry, particularly, is an energy intensive industry and is considered a significant source of Greenhouse Gas (“GHG”) emissions. Hydrogen is now being considered as a promising alternative energy source to fossil fuels given its abundance, versatility and zero-emissions. The Hydrogen Council estimates that hydrogen could fulfill 18% of global energy demand by 2050.
Owing to government regulations and public demand, leading miners have been striving to transition from diesel to hydrogen fuel cell power for their heavy-duty vehicles as these have the same payload capability and performance of diesel vehicles, while ensuring no emissions. This energy transition has immense potential for Caterpillar and other mining equipment makers in the long haul.
Recently, BHP Group BHP announced a partnership with Caterpillar to develop and deploy zero-emissions mining trucks at its sites to help reduce GHG emissions. Miner, Anglo American, is working toward developing the world’s largest hydrogen-powered mine haul truck.
Meanwhile, the intensifying global focus on shifting from fossil fuels to zero emissions will require a large amount of commodities. This is a win-win situation for both miners and mining equipment makers. Capitalizing on this trend, Caterpillar is helping customers achieve their energy transition through its innovations, which include a battery powered, zero-emissions switcher locomotive and underground loader, and reciprocating engines and gas turbines that burn hydrogen blends, landfill gas and other biogases. It is also developing a variety of alternative power solutions to support a lower-carbon future, including battery-powered construction machines. Caterpillar expects that 100% of its new products through 2030 will be more sustainable than the previous generation via collaborations with customers, reduced waste, improved design for rebuild/remanufacturing, lower emissions and improved efficiency.
Caterpillar’s peer, Komatsu Ltd. KMTUY, will start a hydrogen development program to develop hydrogen power as an alternative to diesel for heavy-duty mining dump trucks this year, with an aim of launching its first vehicles in 2030. Komatsu and several of its customers, Rio Tinto plc RIO, BHP, Codelco and Boliden have formed the Komatsu GHG Alliance to work toward delivering zero-emissions equipment solutions. The company has been working to reduce greenhouse gas emissions for customers through innovative product development for decades in several areas including electric diesel dump trucks, electric power shovels, regenerative energy storage capabilities and fuel saver programs.
Caterpillar and Komatsu fall under the Zacks Manufacturing - Construction and Mining industry. The Zacks Manufacturing - Construction and Mining industry has outperformed the Industrial Products Sector and the S&P 500 composite over the past year. Over this period, the industry has gained 41.4% compared with the sector's and the S&P 500 composite’s rally of 31.9% and 27.7%, respectively.
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The industry is poised to gain on improving commodity prices that will support spending in the mining industry, and solid construction demand. However, the industry is currently grappling with higher input and logistic costs, and labor shortages. Caterpillar and Komatsu has a Zacks Rank #3 (Hold) currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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