Glencore To Cap Coal Production, Reduce Copper Mining in Congo

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--One of the world's leading mining and commodity traders, Glencore, has announced plans to cap coal production as part of a global transition away from high-carbon-dioxide (CO2) emitting fuels.

Glencore announced that it will limit its output to 145 million tons of thermal and metallurgical coal--the upper end of its guidance for the year--and also pledged not to make any acquisitions that would boost its total production targets. The company said that it has "a key role to play in enabling transition to a low-carbon economy" through its "well-positioned portfolio that includes copper, cobalt, nickel, vanadium and zinc--commodities that underpin energy and mobility transformation. We believe this transition is a key part of the global response to the increasing risks posed by climate change."

Industrial Info recently highlighted that Glencore operates 24 coal mines on three continents and is developing half a billion dollars' worth of coal mining projects, including several grassroot mines in Australia and South Africa, according to Industrial Info's Global Market Intelligence Platform.

Glencore stated: "We recognise climate change science as set out by the United Nations Intergovernmental Panel on Climate Change. We believe that the global response to climate change should pursue twin objectives: both limiting temperatures in line with the goals of Articles 2.1(a)1 and 4.12 of the Paris Agreement ('the Paris Goals') and supporting the United Nations Sustainable Development Goals, including universal access to affordable energy. To deliver a strong investment case to our shareholders, we must invest in assets that will be resilient to regulatory, physical and operational risks related to climate change."

Glencore said that to meet "growing needs of a lower carbon economy", Glencore will prioritise its capital investment to grow production of commodities essential to the energy and mobility transition and to limit its coal production capacity broadly to current levels. The company is cutting jobs and production at one of its largest copper and cobalt mining operations at Mutanda in the Democratic Republic of Congo. Production will be 100,000 metric tons of copper for 2019, half of the 199,000 tonnes produced last year. Cobalt production will be 25,000 tonnes this year. A global glut of cobalt has seen prices over the past year tumble from roughly $100,000 per tonne to $31,000 per tonne.

Reacting to the news, Wood Mackenzie's Research Director Prakash Sharma said: "Glencore is a major coal producer and world's largest exporter of thermal coal. We estimate it had a market share of nearly 25% in the seaborne trade last year. It also has a dominant position in the premium thermal coal segment. In that regard, capping coal production is significant because prices could remain high amid tighter supplies. Glencore is chasing value over volume. In a 2-degree scenario, premium thermal coal demand is expected to be resilient compared to other coal types. That means companies holding on to high energy thermal coal assets stand to gain and will realise higher prices. Glencore sits comfortably in that space due to its competitive cost position."

As part of the changes, from 2020 Glencore intends to publicly report to investors on how it the company's capital expenditure and investments are aligned with the Paris Goals. It will include each material investment in the exploration, acquisition or development of fossil fuel (including thermal and coking coal) production, resources and reserves, as well as in resources, reserves and technologies associated with the transition to a low carbon economy.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.