Australia’s largest coal miner Glencore will cap its global coal output at current levels in the wake of pressure from activist shareholders as part of a pivot towards minerals used in renewable technologies.
The miner announced on Wednesday night that, while it will continue mining thermal coal, which is used in power stations, and coking coal, which is used for making steel, it will limit production to current levels.
Glencore will instead focus on metals such as cobalt, nickel, vanadium and zinc, which are all key components of batteries as it targeted lower carbon industries as its customers.
“We aim to prioritise capital investment to grow production of commodities essential to the energy and mobility transition and to limit our coal production capacity broadly to current levels,” the company said as part of its results announcement.
Glencore set its guidance for 2019 at 145 million tonnes of coal globally. Glencore said it would examine its membership of trade associations to ensure those groups aligned with the Paris climate agreement and Paris goals. These associations include the Minerals Council of Australia.
The company told investors that it recognised the increasing risks associated with climate change.
“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,” a company statement said.
In 2017, Glencore became Australia’s largest coal miner after it acquired 49 per cent of Rio Tinto’s Hunter Valley Operations for about $US1.14 billion ($1.59 billion). It then bought Rio Tinto’s interest in Queensland coal mines giving it a total local output of more than 88 million tonnes.
The deals have helped put Glencore in a dominant position in the Asia Pacific market for high-quality thermal coal.
Federal Minister for Resources Matt Canavan said Glencore was moving to secure its market position.
“Last year Glencore made one of the biggest purchases of thermal coal assets in history. And now they say no one else should mine coal.
“Call me sceptical but this sounds like just basic self-interest – Glencore dominate the seaborne thermal coal market and of course they don’t want to let others in.”
In 2017 Glencore’s climate change report the company predicted continued global investment in coal-fired power with around 220 new coal-fired generators to be built over the next 15 years particularly in the local region.
Around two-thirds of Glencore’s mining operations are in Australia, with the rest in South Africa and Colombia.
Emma Herd, chief executive of the Investor Group on Climate Change, said: “Glencore’s announcement is a significant step for the mining sector with potentially wide-reaching implications … Investors will now be looking for more companies in the sector to align their business decisions with the Paris Agreement”.
“Climate change brings both risk and opportunity for investors,” said Anne Simpson chair of the steering committee of Climate Action 100+, representing major investors that are pushing for emissions cuts. “Keeping global warming to well below two degrees demands bold and urgent action from the world’s largest greenhouse gas emitters.”
The Australian Centre for Corporate Responsibility, which is part of a global network of activist investors, said the decision was part of a shift away from coal.
“Today represents ‘peak coal’ for Glencore,” ACCR spokesman Dan Gocher said.
“This announcement will also reverberate around state parliaments, and in Canberra. Governments can no longer budget on the infinite flow of revenues from coal exports.”
The development comes amid a deepening political stoush over the planned Adani mega-mine at Carmichael in Queensland which the state Labor government is opposing in a move that has caused a split with the mining union.
Mr Canavan attacked Labor over comments by opposition defence spokesman Richard Marles that it was a “good thing” if the coal industry was in decline.
“Richard Marles is hopelessly wrong. He said that global thermal coal markets were ‘collapsing’. Last year, there was a record amount of coal-fired power generated across the globe, coal is now our biggest export again and coal prices are near record highs – helping to support the budget,” Mr Canavan said.
Labor frontbencher Richard Marles had told Sky News that the declining price was positive because it meant “the world is acting in relation to climate change”.
The price of thermal coal in Australia recently fell to a 19 month low.
“The benchmark Newcastle high energy thermal coal price has fallen from $US100 per tonne at the turn of the new year to $US88 per tonne,” Wood Mackenzie analyst Viktor Tanevski said this week in a note to clients.
“On a price standpoint, we expect prices to recover and average $US98 per tonne this year, down from $US107 per tonne last year. Prices will remain elevated in 2019 given fundamental support for high energy thermal coal.”
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