With all eyes on commodities firm Glencore’s decision on whether to retain or spin off its coal assets, analysts say the diversified resource firm could be seeking to bridge the gap left by the world’s jump to energy transition race by retaining the assets and seeking to separately list them in New York.
Glencore, which is secondary listed on the JSE and has its prime listing on the London Stock Exchange, said this week that it would update the market regarding its decision on the coal assets when it releases its interim financials next week.
Glencore shareholders also appear to have recently changed their attitude to the group’s Climate Plan. Shares in the company recovered on the JSE yesterday as it traded 2.93% higher at R101.05 in afternoon trade.
Now, faced with growing opposition from environmentalists and some shareholders as well as the need to re-strategise and position well along the lines of decarbonisation, Glencore is consulting shareholders on what to do with its coal assets.
The company’s production of the energy commodity at about 50.6 million tons for the half year period to June was lower by 3.6 million tons or 7% compared to the same period last year.
Bruce Williamson, a mining and resources analyst at Integral Asset Management told Business Report in an interview yesterday, “Glencore has taken the view, correctly, that if all global coal, oil and gas operations were closed immediately we might all breathe and have clean air, but in the dark.”
Other analysts said if Glencore opted against a spin-off of the coal assets, a decision they said was more likely, then management of the company would be more inclined to list the coal entity in New York.
Glencore has already hived off its steel-making and energy coal production numbers while CEO Gary Nagle said on Tuesday that the company was engaging shareholders “to assess their views regarding the potential demerger” of the coal and carbon steel business segments.
“Coal is a big segment for Glencore although it has been facing headwinds from a pricing and logistics perspective. South Africa has been problematic too, with logistics taking longer to fix,” said an analyst with a South African bank, who declined to be named, yesterday.
BHP and Anglo American had, however, already started processes to dispose of their coal businesses. Williamson said BHP and Anglo American could have bowed down to pressure from shareholders, investors and increased societal opposition to non-clean energy.
“BHP and Anglo are giving in to society and share holder activists and have decided to sell their coal assets. Glencore are playing a pragmatic role, helping to make sure that as we transition to a cleaner, greener world that there is still sufficient, reliable, and affordable sources of energy,” he said.
In the full year to December 2023, coal accounted for 60% of Glencore’s adjusted earnings before interest, tax, depreciation and amortisation (Ebitda). Coal also made up 40% of Glencore’s adjusted Ebitda, making “coal the biggest” contributor.
“Society should accept that someone has to play the supporting role in the transition and instead of thousands of unscrupulous operators feeding small amounts of coal into the market which is costly and not reliable, rather have a few big players handling the supply and it is easier for society to monitor the likes of Glencore,” explained Williamson.
BUSINESS REPORT