Coal news and updates

Glencore has re-started coal production in Australia after a flash blanket shutdown across its operations, but has been met with lower prices for the struggling commodity than when it launched the shock move.

Benchmark thermal coal was fetching $US63.30 a tonne when Glencore kicked off its three-week shutdown in mid-December. When the shutdown ended on Monday, it was trading at $US61.20 a tonne.

On announcing the unprecedented shutdown, the Swiss trading giant said it was pulling back production to avoid pushing incremental tonnes into a depressed, oversupplied market.

Glencore is the biggest coal producer in Australia and the world's dominant coal exporter.

 

Tony Hayward, Glencore's chairman, has provided some insight into the thinking behind the shutdown, saying last month that it was an attempt to create tightness in the market because that was the right thing to do. Dismal coal prices were not good for Glencore or Australia, he said.

It is thought the move could have been in part symbolic, and designed to position Glencore chief Ivan Glasenberg as a superior marketing manager to his counterparts at major rivals, particularly Rio Tinto.

Bernstein mining analyst Paul Gait has told Fairfax Media that Mr Glasenberg would be able to point to Glencore's willingness to pull tonnes out of an oversupplied market in a direct challenge to Rio over its expansion in iron ore.

"To me this coal announcement is clearly Ivan ­playing games," he told Fairfax Media.

"It had the language of someone trying to make his credentials on managing the market as a CEO. It's a shot across the bows to Rio."

Glencore is thought to be preparing for a second tilt at Rio, after being rebuffed last year on a merger offer that would have created a $US190 billion giant. Under UK takeover laws, Glencore cannot have another crack at Rio until April.

Mr Glasenberg has repeatedly attacked the expansion strategies being used by Rio and its ­fellow iron ore majors, and their price impact, as part of his attempt to pitch the merger.

The Christmas coal shutdown reduced Glencore's output by about 5 million tonnes, a big chunk of which would have been sold into the market at a loss.

By spreading the hit across its ­business, Glencore could have avoided mothballing one of its more ­marginal ­operations for a much longer time.

 

 

 

Source: http://www.smh.com.au/