Column: China’s run of robust thermal coal imports may ease
One of the standout commodity stories so far this year has been China's demand for thermal coal, with the world's largest importer seeing record shipments.
Anglo American Plc laid out the scale of challenges it faces as the company pushes ahead with a radical restructuring plan, after rebuffing a takeover approach from rival BHP Group earlier this year.
The company on Thursday pointed to setbacks at its coal and diamond businesses, as well as an expected $1.6 billion writedown at a fertilizer mine in the UK, as it announced first-half earnings results.
Anglo has been forced to accelerate its restructuring after successfully holding off the bid from BHP, the world’s biggest miner. The plan centers around exiting diamond mining by spinning off or selling its De Beers unit, separating platinum and selling its coal mines. It also has also halted development of the Woodsmith project in Britain.
“We are advancing at pace,” Chief Executive Officer Duncan Wanblad said on a call with reporters. “We are on track to be substantially done with this process by the end of 2025.”
Yet the miner is facing headwinds in that process. A fire and explosion at its flagship coal mine in Australia has complicated the De Beers sale, while the diamond market continues to languish, deterring potential buyers of the unit.
Selling the coal business was seen internally and by investors as the most easily achievable part of the restructuring, yet it was thrown into doubt by the incident at the Grosvenor mine in Australia at the end of last month. Despite that, Anglo’s Wanblad said that it would still look to sell the entire coal business, including the impacted mine, and would like to see a deal done by the end of the year.
Selling the coal business was seen internally and by investors as the most easily achievable part of the restructuring, yet it was thrown into doubt by the incident at the Grosvenor mine in Australia
“Almost all of the bidders reconfirmed their interest,” Wanblad said in an interview with Bloomberg TV. “On the back of that reconfirmation of their interest, we decided to carry on and we will include Grosvenor in the package.”
Other issues are complicating the sale of De Beers.
The diamond market, which came to a complete halt last year as weak global demand combined with too much supply, has seen early signs of a recovery broadsided by a slump in luxury spending in China. Anglo cut its diamond production on Thursday for the second time this year, in an attempt to deal with the oversupply.
“Diamond markets are particularly soft at the moment, and a lot of that is because what is happening in China,” Wanblad said in the TV interview. “It has all the characteristics of the bottom of the cycle for diamonds.”
Wanblad said a recovery in the diamond market is now expected to be delayed until next year, but that wouldn’t stop the company’s plans to sell De Beers.
The company on Thursday reported underlying earnings of $4.98 billion in the first half of 2024, a 3% drop from a year earlier. Anglo American shares were little changed by 12:21 p.m. in London, after declining earlier.
The miner’s strong performance demonstrates “early success of the cost-savings program,” according to Bloomberg Intelligence metals and mining analyst Grant Sporre.
Still, while Anglo’s financial results were positive, there are “relatively high risks associated with the company’s proposed restructuring plan,” said Jefferies analyst Christopher LaFemina.
(By Thomas Biesheuvel)
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