Because gas is the main ingredient in ammonium nitrate, which is used to make explosives and fertiliser, surging prices on Australia’s east coast and the prospect of gas shortfalls pose significant concerns for Orica.
“I never ask for subsidies, I just ask for support to ensure there’s enough gas being allocated to heavy industry in this country.”
Gandhi said Orica was also a major consumer of electricity, and was therefore facing a “double whammy” of energy price pressures.
Orica last year sunk to a net loss amid what it called a “perfect storm” of factors including COVID-19 disruptions and international trade disputes that hammered the company and its biggest customers in the mining industry all at once.
Although Orica posted a bottomline loss for the six months to March 31 this year, Gandhi said the result reflected positive “momentum” on delivering a new strategy focusing on enhanced technological offerings, attracting new customers in key Asian markets and expanding its reach into “future-facing” commodities such as electric-vehicle raw materials like lithium, nickel and cobalt.
He added that Orica was preparing for a “higher for longer” mining cycle as demand intensifies for a range of resources, including coal and iron ore as well as those needed to power the clean-energy age.
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“Nobody knows how high, but we need to be ready to mobilise support for our customers,” he said.
“I don’t know when this will end, but even if it does, the structural shift into … decarbonisation, and future-facing commodities is here to stay.”
Morgans analysts said Orica had navigated a period of rising raw material costs, disruptions in Europe and wet weather across the east coast of Australia, and “still delivered ahead of our expectations”.
“Management of raw materials costs was a highlight and showed a proactive and nimble approach that, we think, is a sign of evolution under new management,” Morgans said.
Orica shares, which rose nearly 10 per cent on the back of the latest results, were trading at $16.39 in the afternoon session.
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