The giant Glencore wants to exit coal, so it buys a coal group
The world's second-largest coal company is looking to exit the coal business, marking a big shift in the industry. For years, Glencore has maintained a steadfast commitment to the coal industry, reaping the benefits as other companies exited the market amid growing pressure to reduce and phase out the world's dirtiest fossil fuel. But now the company is throwing in the towel, believing the market is trending towards the end.
Late last month the Vancouver, British Columbia-based coal giant signed a multibillion-dollar deal to buy the coal assets of Canadian miner Teck Resources – to create a huge coal mining group that it will then be sold outright, in what the Wall Street Journal called “a move that represents the company's biggest strategic shift in years.” Why buy the coal sector? To facilitate a smooth and profitable exit from coal, so that the company can complete its current transition to a metals transition business – and make a lot of money in the process.
The deal will allow Glencore to combine its significant thermal coal business with Teck resources' metallurgical coal business, all of which will be packaged together and sold as a stand-alone coal business within two years of the deal with an extremely high profit . “Some analysts estimate that the new coal company could be worth between $22 billion and $35 billion when it goes public,” reports the Wall Street Journal, “a valuation far higher than that of the largest U.S. coal companies.” The company will be listed in New York, as Glencore CEO Gary Nagle believes that “US investors are more pragmatic and focused on returns than Europe, where decisions appear more influenced by environmental, social and governance”.
However, the decline of coal cannot be attributed to corporate social responsibility and general do-goodism. One of the key drivers of the decline in demand for coal is China's slowing economic growth. The country, which has a disproportionate presence in all global energy markets, particularly coal, has reached its economic inflection point after decades of breakneck economic growth and rapid infrastructure expansion. According to EIA projections, “if China's short-term growth were to slow by another percentage point, coal demand in 2030 would be reduced by an amount almost equal to the volume currently consumed by the whole of Europe.” For companies like Glencore, this is the case. The world will continue to consume coal abundantly over the next decade, but at an ever-decreasing rate, which is not good for business.
Going forward, Glencore intends to focus on metals that are expected to fuel the green energy transition. The green energy revolution is fueling a modern-day gold rush for rare earth minerals and metals, critical for the infrastructure needed for solar panels, electric vehicle batteries, wind turbines and more. The scale of future demand is enormous. The International Energy Agency (IEA) forecasts that global renewable capacity will grow by as much as 107 gigawatts (GW) to reach more than 440 GW in 2023, the largest absolute increase ever. At the same time, sales of electric vehicles are expected to rise 35% by the end of this year, reaching 14 million, in a rise that the IEA has called “explosive”.
Capturing the largely untapped rare earth minerals market represents a major economic opportunity, and countries around the world are currently racing to strengthen supply chains and acquire reserves as quickly as possible. Demand for elements such as cobalt and lithium is already increasing and Glencore wants to be the key supplier. “We have some of the best future-facing metals in the world,” Nagle said last week, referring to the nickel, copper, cobalt and zinc assets of
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The article The giant Glencore wants to exit coal, so it buys a coal group comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-colosso-glencore-vuole-uscire-ddal-carbone-quindi-acquista-gruppo-carbonifero/ on Mon, 11 Dec 2023 07:00:51 +0000.