Glencore Rising A Large Winner From Coal Consolidation

Bulk carriers are loaded with coal for export at the Australian port of Newcastle. Photographer: Brendon Thorne/Bloomberg

</div> </div> <p>An example cited in a research report published this week was how Glencore was able to delay settlement in annual coal-price negotiations with Japanese buyers in order to win a higher price.</p> <p>Macquarie, an Australian investment bank, said Glencore’s greatest influence was in top-grade thermal coal used to generate electricity rather than metallurgical, or coking coal used to make steel.</p> <p> </p> <p>&quot;Glencore’s increasing seaborne thermal coal-market control focuses on the trade’s top grade,&quot; Macquarie said.</p> <p><strong>Delayed Settlement Earns A Higher Price</strong></p> <p>&quot;The fact that Glencore was able to delay the annual settlement with the Japanese power utilities for four months this year, until spot (short-term) prices recovered, was a remarkable demonstration of market power&quot;.</p>

Ivan Glasenberg, billionaire and chief executive officer of Glencore Plc. Photographer: Simon Dawson/Bloomberg

</div> </div> <p>With deep commodity-trading roots Glencore and its management team, led by Ivan Glasenberg, have never been afraid of taking controversial positions or in doing business in countries that other mining companies avoid.</p> <p>The cobalt trade in the Democratic Republic of Congo is a sector avoided by most miners, as is trading in copper mined in Congo.</p> <p>Coal, however, is in another league with deals measured in the billions of dollars, not just millions.</p> <p>What’s becoming particularly interesting is trying to judge whether Glencore has backed a winner while rivals such as BHP and Rio Tinto, have sold too soon in order to placate environmentally-conscience investors and increasingly vocal activists.</p> <p>While impossible to accurately compare the diversified miners because they have different specialties it is interesting to look at share-price movements over the past six weeks, a time which includes a sell-off and recovery by all four. BHP, as measured by its shares listed on the London Stock Exchange, is up 4.6%. Rio Tinto is up 4.1%, and Glencore is up 8.4%.</p> <p><strong>Glencore Consolidates In An Unpopular Industry</strong></p> <p>&quot;As major diversified miners withdraw from thermal coal, Glencore has stepped into the breach, busily consolidating its position in an unpopular sector of the mining industry,&quot; Macquarie said.</p> <p>&quot;Glencore is now the world’s largest producer and exporter of seaborne thermal coal.&quot;</p>

A stacker-reclaimer operates next to stockpiles of coal at the Newcastle Coal Terminal in Australia: Brendon Thorne/Bloomberg

</div> </div> <p>Macquarie estimates that Glencore controls around 12% of the seaborne thermal coal market, which is relatively modest compared with BHP’s 22% of the seaborne metallurgical coal market,</p> <p>But where Glencore has a major position is in the highest-quality coal which is in increasing demand because it generates more heat and is less polluting. In that segment Glencore has an estimated 35% market share, giving it &quot;considerable price influence in the Pacific basin,&quot; Macquarie said.</p> <p>Another reason for coal reclaiming headlines as an investment rather than as an environmental target is a plan by the Texas-based private equity business, Energy and Minerals Group, to raise $1 billion through an initial public offering and listing on the Australian Stock Exchange&nbsp;(ASX) later this month.</p> <p>Energy and Minerals controls Coronado Coal which late last year acquired the Curragh coal mine in the Australian State of Queensland for a reported $539 million.</p> <p>Coranado is scheduled to list on the ASX on October 23 in what is being described as the biggest coal float in Australia in seven years.</p> <p>&nbsp;</p>”>

The inconvenient fact of coal costs which refuse to fall as demanded via environmental activists and a few buyers and governments is proving to be a somewhat handy reality for one of the vital international’s largest mining and commodity buying and selling corporations, Glencore.

Whilst different large miners had been promoting coal property Glencore has been purchasing and if contemporary indications are right kind it now controls sufficient of the seaborne coal marketplace to have a noticeable impact on fee.

Bulk carriers are loaded with coal for export on the Australian port of Newcastle. Photographer: Brendon Thorne/Bloomberg

An instance cited in a analysis record revealed this week was once how Glencore was once in a position to extend agreement in annual coal-price negotiations with Jap patrons as a way to win the next fee.

Macquarie, an Australian funding financial institution, stated Glencore’s biggest affect was once in top-grade thermal coal used to generate electrical energy somewhat than metallurgical, or coking coal used to make metal.

“Glencore’s expanding seaborne thermal coal-market keep watch over specializes in the industry’s height grade,” Macquarie stated.

Behind schedule Agreement Earns A Upper Worth

“The truth that Glencore was once in a position to extend the yearly agreement with the Jap energy utilities for 4 months this yr, till spot (temporary) costs recovered, was once a exceptional demonstration of marketplace energy”.

Ivan Glasenberg, billionaire and leader govt officer of Glencore Percent. Photographer: Simon Dawson/Bloomberg

With deep commodity-trading roots Glencore and its control workforce, led via Ivan Glasenberg, have by no means been frightened of taking arguable positions or in doing trade in international locations that different mining corporations keep away from.

The cobalt industry within the Democratic Republic of Congo is a sector have shyed away from via maximum miners, as is buying and selling in copper mined in Congo.

Coal, on the other hand, is in any other league with offers measured within the billions of greenbacks, no longer simply thousands and thousands.

What is turning into in particular fascinating is attempting to pass judgement on whether or not Glencore has sponsored a winner whilst opponents similar to BHP and Rio Tinto, have bought too quickly as a way to placate environmentally-conscience buyers and more and more vocal activists.

Whilst not possible to appropriately evaluate the varied miners as a result of they have got other specialties it’s fascinating to have a look at share-price actions during the last six weeks, a time which incorporates a sell-off and restoration via all 4. BHP, as measured via its stocks indexed at the London Inventory Trade, is up four.6%. Rio Tinto is up four.1%, and Glencore is up eight.four%.

Glencore Consolidates In An Unpopular Business

“As main varied miners withdraw from thermal coal, Glencore has stepped into the breach, busily consolidating its place in an unpopular sector of the mining trade,” Macquarie stated.

“Glencore is now the sector’s biggest manufacturer and exporter of seaborne thermal coal.”

A stacker-reclaimer operates subsequent to stockpiles of coal on the Newcastle Coal Terminal in Australia: Brendon Thorne/Bloomberg

Macquarie estimates that Glencore controls round 12% of the seaborne thermal coal marketplace, which is slightly modest when compared with BHP’s 22% of the seaborne metallurgical coal marketplace,

However the place Glencore has a big place is within the highest-quality coal which is in expanding call for as it generates extra warmth and is much less polluting. In that section Glencore has an estimated 35% marketplace proportion, giving it “really extensive fee affect within the Pacific basin,” Macquarie stated.

One more reason for coal reclaiming headlines as an funding somewhat than as an environmental goal is a plan via the Texas-based personal fairness trade, Power and Minerals Staff, to lift $1 billion thru an preliminary public providing and list at the Australian Inventory Trade (ASX) later this month.

Power and Minerals controls Coronado Coal which overdue remaining yr got the Curragh coal mine within the Australian State of Queensland for a reported $539 million.

Coranado is scheduled to checklist at the ASX on October 23 in what’s being described as the largest coal go with the flow in Australia in seven years.

 

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