Funds pull $20 billion from copper as mega bull trade unravels
Mounting worries about Chinese demand is helping to spark a rapid exodus from copper.
Analysts expect Glencore to keep its coal business as a strong contributor to revenue, following its acquisition of assets from Teck Resources.
The miner and trader, which this month completed a deal to buy the majority of Teck’s steelmaking coal business, said it was asking shareholders if they wanted the combined coal assets to remain part of Glencore or be spun into a separate company.
At its first-half production results on Tuesday, Glencore said it would announce the decision of shareholders and the board at its Aug. 7 interim financial results.
“We are now in the process of consulting with shareholders to assess their views regarding the potential demerger of our coal and carbon steel materials business,” CEO Gary Nagle said in a statement.
Many of the world’s biggest listed companies have exited coal because of investors’ concerns over its contribution to global warming, but Glencore is still committed to the carbon-intensive fossil fuel.
It is one of the largest producers and exporters of thermal coal, with an expected output of between 98 million and 106 million metric tons this year.
Its 2024 steelmaking coal production should increase to 19-21 million tons post-acquisition, from 7-9 million, it said on Tuesday.
Analysts at Jefferies, UBS and Bank of America said a demerger was unlikely.
“Investors appreciate the strong cash flow from coal, particularly if it is channelled to capital returns/buybacks,” Bank of America analysts said in a note.
Reuters in March reported that a growing group of Glencore investors were keen for it to continue to mine coal instead of spinning out the soon-to-be enlarged unit.
A demerger could lead to short-term price gains, but critics say spinning coal assets off would not address the environmental issues should they become privately owned and less subject to investor oversight.
Glencore previously said it planned to run down its thermal coal mines by the mid-2040s, closing at least 12 by 2035.
Its share price was down 2.6% by 1243 GMT.
Glencore reported lower numbers for its first half copper, nickel, zinc, coal and cobalt production, compared to the same year-ago period.
It left its overall 2024 guidance for copper, a metal needed for energy transition applications, unchanged at between 950,000 and 1.01 million tons, having produced 462,600 tons in the six months to June.
(By Clara Denina and Felix Njini; Editing by Miral Fahmy and Barbara Lewis)
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