12 ★ FINANCIAL TIMES Thursday10 October 2019

COMPANIES

T

he sooty towers of Scunthorpe’s blast furnaces

have for decades been a symbol of the English

town’ssteelmakingheritage.

If aproposed rescue deal or the plant’sf

strickenownerBritishSteel omestopass,thec

harmful gases they spew out could one day become a thing

ofthepast.

Ataer Holding, an arm of Turkey’s military pension

fund, which is in exclusive talks to buy the company out of

liquidation, wants to eventually convert the steelworks to

runonhydrogeninsteadofcoal.

The plans take a cue from other European steelmakers,

who are leading the charge to reduce the industry’s carbon

emissionsbyharnessingthemostabundantelementinthe

universe for fuel. Although hydrogen steelmaking is in its

infancy, if successful it could drastically cut CO2 emissions

from one of the most polluting sectors and make a serious

contribution towards the EU’s goal of becoming “climate

neutral”by2050.

For environmental campaigners, these efforts are long

overdue. Until now, attempts to reduce carbon emissions

have focused largely on power generation and transport,

they say. There has not been enough progress in smoke-

stack industries, such as steel, cement and chemical man-

ufacturing,theyadd.

On average, each tonne of steelresults in 1.83 tonnes of

CO2, a figure that has remained roughly constant over the

past decade, according to the World Steel Association. The

industry accounts for 7 to 9 per cent of all direct emissions

fromfossilfuels.

Thesimplereasonisthechemistryofthemanufacturing

process.Tomakesteel,ironisfirstextractedfromitsorein

blast furnaces at temperatures of up to 1,200 C using coke,

a carbon-rich form of coal. An unavoidable byproduct of

thereactioniscarbondioxide.

Replace coke with hydrogenand the main byproduct of

steelmakingiswaterratherthanCO2.

“It seems to be the only technology on the horizon that

could completely take carbon out of making steel from

iron ore,” said Chris McDonald, chief executive of the

MaterialsProcessingInstitute,aUK-basedresearchorgan-

isation. “It’s a massive prior-

ityfortheindustry”.

The world’s largest steel-

maker, ArcelorMittal, is

building a €65m demonstra-

tion plant in Hamburg that it

says is the first of its kind.

Hydrogen gas produced

using electricity from off-

shore wind farms will reduce

ore into iron pellets, which will then be melted into liquid

metal.

Yet the company says commercialisation is not on the

horizon for 10 to 20 years.Mor eover, costs will be 60 to 90

per cent higher than existing methods. However Swedish

steelmaker SSAB, which has a similar project, believes

fossil-freesteelwillbecompetitiveinfuture.

For now, the main stumbling block is the cost of clean

hydrogenproducedwithrenewableenergy,whichisabout

$5 a kilogramme. At $2/kg there would be a “tipping

point” enabling it to compete without subsidies in many

sectors, according toMarco Alverà, chief executive of

Europe’s largest gas utilitySnam, inGeneration H, a recent

bookonthesubject.

At the same time, global economic uncertainty risks

undermining efforts to decarbonise steelmaking. The

trade war between the US and China has made Europe a

destination for cheap foreign metal at a time when

demandisfallingbecauseofadownturninthecarmarket,

thoughtougherEUprotectionsareofferingsomerespite.

The industry has also argued that EU environmental

policy may cause problems. The price of the carbon allow-

ances that polluting industries must buy to offset emis-

sions has tripled over the past two years and is forecast to

risefurther.Thiswilleatintoprofits,companieswarn,and

theirabilitytoinvestindecarbonisinginnovations.

“Many European steel producers simply don’t have the

moneytodothesebig... projectseveniftheywouldwant

to,it’sjustimpossible—themarginsimplyisn’tthere,”said

FrankBekaertofMcKinsey.

A helping hand may however come from the new Euro-

pean Commissioner for climate, Frans Timmermans. He

has suggested a “carbon border tax” on imports from

countries with laxer environmental rules, and therefore

lowerproductioncosts.

Hydrogen-powered steelmaking may appear a distant

prospectfornow.Butifitdoeshappen,itwouldbenothing

short of the most revolutionary change in the industry

since the English inventor Henry Bessemer patented a

methodformassproducingthemetalinthe1850s.

[email protected]

INSIDE BUSINESS

EUROPE

Michael

Pooler

Steelmakers bet on

hydrogen as route

to a greener future

Replace coke

with hydrogen —

and the main

byproduct is

water not CO

O RT E N C A A L I A J— NEW YORK

BlueMountain Capital, the hedge fund
that battled bitterly with California
utilitygroupPacificGasandElectricCo
over its plans to file for bankruptcy, is
shutting down its flagship fund as the
firm’sco-founderpreparestoleave.

Stephen Siderow, who co-founded the
firmwithAndrewFeldsteinin2003,will
leave at the end of the year “to consider
newopportunities”,accordingtoastate-
ment.
BlueMountain, which manages $18bn
in assets, began as a credit specialist
with $300m in assets before expanding
beyondcorporatedebtasclientspoured

money into its funds. It enjoyed a ban-

ner year in 2012 after turning a huge

profit on the so-called “London whale”

trade that saw JPMorgan Chase hit by a

$2bn trading loss, which Mr Feldstein

laterhelpedthebanktounwind.

The closing of its flagship fund comes

just one week after bond insurer

Assured Guaranty agreed to buy Blue-

Mountainfor$160m.

The firm’s $2.5bn flagship BlueMoun-

tain Credit Alternatives fund is facing

one of its worst years in terms of per-

formance having declined 7.5 per cent

uptoSeptember.Thefundhasstruggled

toperform espitechargingd upto30per

centinmanagementfees.

In May, Affiliated Managers Group

reporteda$415mwritedownofitsstake

in BlueMountain, whose growth expec-

tations, it said, had declined. In an earn-

ings call, Nathaniel Dalton, AMG chief

executive, said the firm had moved

from its core strengths in credit and vol-

atilitytrading.AMGsolditsequitystake

toAssuredGuarantyfor$91m.

Lastyear,BlueMountainmadewhatit

calleda“highconvictioninvestment”in

PG&E before the California utility was

implicated in a number of California

wildfires. In a letter to investorsin

December, BlueMountain said PG&E

had led to losses of as much as 2.9 per

centinitsfunds.

Financials

BlueMountain Capital shuts flagship fund

H A N N A H M U R P H Y— SAN FRANCISCO

Twitter said it had “inadvertently”

used personal information such as

phone numbers and email addresses —

provided by users to make their

accounts more secure — to target

advertising.

The San Francisco-based social media

company said in a blog post that it had

matched users based on the email and

phone numbers they provided “for

safety and security purposes”, such as

two-factor authentication, to advertis-

ers’ marketing lists. “This was an error

andweapologise,”Twittersaid.

Data misuse whereby platforms take

information gathered for security pur-

posesto bolster their ad targeting capa-

bilities is not new, withTwitter ivalr

Facebook omingunderfirerecentlyforc

the practice. Indeed, Facebook was

explicitly banned from doing so in July

as part of its$5bn settlement ith thew

USFederalTradeCommissionfollowing

an investigation into its privacy prac-

tices.

Twitter aid on Tuesday that it “can-s

not say with certainty how many people

were impacted” by its news, but added

that “no personal data were ever shared

externally with our partners or any

other third parties”. The practice

affectedusersglobally,itsaid.

The social media group said it had

addressed the problem as of September

17, although it is unclear why the com-

panydidnotnotifyuserssooner.

It is unclear whether the incident will

count as a breach of Europe’s General

Data Protection Regulation. Twitter

told the Financial Times that it was

working in co-operation with regulators

whereappropriate.

Therevelationscomejusttwomonths

after the company admitted it shared

certain user and device data with adver-

tisers without the permission of those

individuals for almost a year, after their

“settings choices may not have worked

asintended”.

Technology

Twitter says it used personal data to target ads

O L A F STO R B E C K— FRANKFURT
ST E P H E N M O R R I S— LONDON

European regulators are leaning
towards rejectingJürg Zeltner s aa
member ofDeutsche Bank’s supervi-
sory board on conflict of interest con-
cerns, unless he resigns as chief execu-
tive of Qatari-backed European private
bankinggroup,KBL.
In a rare move, supervisors at the
European Central Bank and Germany’s
financial regulator BaFin are poised to
veto Mr Zeltner because they are not
convinced he will be sufficiently inde-
pendent given that KBL competes
directly with Deutsche in wealth man-

agement, said three people with knowl-

edgeoftheprocess.

Mr Zeltner, a former top executive at

UBS who joined KBL in May, was

appointed to Deutsche’s supervisory

boardin August fter British bankera

RichardMeddingssteppeddown.

While German banks do not need

prior approval for senior appointments

underGermanlaw,regulatorscanretro-

spectively remove board members who

theydonotdeemfitandproper.

A senior regulatory official told the

Financial Times they could not imagine

“anyothersolution”apartfromMrZelt-

ner giving up one of the two roles. “This

cannot be talked down because KBL is

tinyrelativetoDeutscheBank.”

It is common for both parties to dis-

cuss potential issues informally before

anyappointmenttoavoidthissortofsit-

uation because it can harm the reputa-

tion of the businesses and individual

involved,oneofthepeoplesaid.

IfMrZeltnerisvetoedbyregulators,it

would be another blow for Deutsche’s

chairmanPaul Achleitner, who also

heads the board’s nomination commit-

tee.

According to people briefed on the

process, Deutsche informed regulators

only a few days ahead of the announce-

ment of Mr Zeltner’s boardroom role.

“Therewasnodetaileddiscussionabout

potentialconflictsofinterestandhowto

resolvethem,”oneofthepeoplesaid.

Deutsche had hoped concerns about a

perceived conflict of interest could be

addressed by a commitment from Mr

Zeltner to recuse himself from certain

board decisions, for example on private

banking, a market Deutschehas tar-

geted orgrowth.f

However, the senior regulatory offi-

cial told the FT: “We will not accept

symbolic solutions that just involve Mr

Zeltner leaving the room when certain

mattersarediscussed.”

Regulators are also wary because Mr

Zeltnerisnotjustasalariedemployeeof

KBL — when he joined, he made a “sig-

nificantco-investment”ofhisown.

If made to choose between the two,

MrZeltnerhasindicatedheismindedto

retain his executive role at KBL over a

directorship at Deutsche, said a person

familiarwiththesituation.

Regulators have not made their final

decision yet and Deutsche and Mr Zelt-

ner maintain it is possible for him to ful-

fil his supervisory role without conflict

ofinterest.

KBL, which owns boutique bank

Brown Shipley n the UK, is backed byi

theQatariroyalfamily,whichisalsoone

ofthebiggestshareholdersinDeutsche.

Banks

Deutsche board member faces veto

Regulators fear Zeltner’s

role as KBL chief means

he has conflict of interest

‘We will not

accept

symbolic

solutions

that just

involve Mr

Zeltner

leaving the

room when

certain

matters are

discussed’

H A N N A H KU C H L E R —NEW YORK

Johnson&Johnson asbeenorderedtoh
pay $8bn after claims that it failed to
warn that young men using its antipsy-
chotic drug Risperdal could grow
breasts.

Thelargest pharmaceuticals company
must pay the punitive damages to
Nicholas Murray, a man who had
already won $680,000 in the lawsuit in
thePhiladelphiacourt.
J&J faces more than 13,000 product
liability claims relating to the drug,
which is prescribed for schizophrenia
andotherdisorders.
The ruling came after J&J was ordered
to pay $2.5m in another case, which
claimed thatthe drug caused an autistic
child to grow large breasts fromthe age
of eight — growth that cannot be
reversed.
The plaintiffs claim that Risperdal
causes gynaecomastia swelling of—
breast tissue in men by activating a—
hormone called prolactin. They also
claim hat the company pushed thet
drugtobeused“offlabel”inchildren.
The verdict comes as J&J’s family-
friendly reputation is being compro-
mised bylawsuits tretching from accu-s
sations that it mis-sold opioids and con-
tributed to the US opioid epidemic to
product liabilitysuits including claims
its talcum powder caused cancer. J&J
contestsbothclaims.
J&J said the award was “grossly dis-
proportionate” with the initial compen-
sationanditwouldmovetosetasidethe
verdict.It was confident it would be
overturned. “The plaintiff’s attorney
failed to present any evidence that the
plaintiff was actually harmed by the
allegedconduct,”itsaid.
The groupsaidthecourtexcludedkey
evidence,includinghowthelabelforthe
drug outlined the risks and the benefits
thatthedrugprovidestopatients.
J&Jshares,whichwereoff1percentin
the trading session, fell a further 2 per
cent in after-hours trading in New York
to $129.25. Last week they rose as much
as 3.6 per cent after J&J agreed to pay
two Ohio counties $20m over its role in
theopioidepidemic.
ThesettlementmeansJ&Jwillnotbea
defendant ina forthcoming bellwether
trial that will see many opioid makers
and distributors accused of causing the
crisis. That deal came after J&J was
ordered to pay $572m in damages in
another opioid case after Oklahoma
found it had caused a “public nuisance”
inthestate.J&Jwillappealthatverdict.

Pharmaceuticals

J&J hit by $8bn

verdict over

antipsychotic

linked to male

breast growth

LVMH osted double-digit revenuep

growth in the third quarter as the

largest luxury group shrugged off the

trade war.

The owner of Dior, Moët & Chandon

and Bulgari saidsales grew 11 per cent

year-on-year on an organic basis to

reach €13.3bn. This is ahead of the 8.

per cent growth and €12.7bn sales

expected by analysts.

LVMH said Europe and the US

made “good progress” during the

three months, while Asia also

performed well “despite a difficult

context in Hong Kong”.

The results come amid political

tension between Hong Kong citizens

and China reaching new highs, as the

semi-autonomous territory under

Chinese sovereignty has protested

since June against Beijing and its grip

on Hong Kong. Investors are looking

for clues as to how much of the

collapse in Hong Kong luxury demand

is made up elsewhere in mainland

China.

It is the firstof the big luxury

houses — which also includeKering,

Richemont nda Hermès to report—

results and as such sets the tone for

the rest of the sector. So far LVMH’s

performance has been resilient, faced

with fears about a Chinese economic

slowdown and anescalating trade war

between China and the US dampening

demand for luxury products.

Fashion and leather goods, the

group’s largest division, grew 19 per

cent , led by its largest brandsLouis

Vuitton nda Dior. Meanwhile, wines

and spirits gained 8 per cent,

perfumes and cosmetics were up 7 per

cent, watches and jewellery gained 5

per cent.

Asia ex-Japan is LVMH’s biggest

market and accounts for a third of the

group’s sales, compared to almost a

quarter for the US, and just under a

fifth for Europe (excluding France).

Growth in Asia ex-Japan wasup 18 per

cent n the first six months of the year.i

LVMH’s shares are up 40 per cent

this year but are flat over the past four

months, reflecting nervousness

related to the trade war and Hong

Kong protests.Harriet Agnew in Paris

Sales boost

LVMH

shows Asia

resilience

Fashion and

leather goods

grew 19%,

led by brands

including

Louis Vuitton

Edward Berthelot/Getty

OCTOBER 10 2019 Section:Companies Time: 9/10/2019- 18:32 User:alistair.fraser Page Name:CONEWS1, Part,Page,Edition:USA, 12, 1