China won’t end coal ban in near term, says outgoing Glencore chief Ivan Glasenberg
Glencore’s outgoing boss says Beijing won’t lift its bans in the near future, books hefty loss on Australian coal mines.
Outgoing Glencore boss Ivan Glasenberg says he sees no end in sight to China’s bans on Australian coal, saying the ban made little financial sense but he saw no sign Chinese authorities would relent.
China’s bans on Australian metallurgical and thermal coal delivered a big hit to Glencore’s annual financial results, delivered overnight.
Its Australian thermal coal mines slumped to a $US528m ($681m) loss, before interest and tax, from a $US1bn profit in 2019. Its coking coal exports booked a $US1m loss, down from a $US546m profit the previous year.
Mr Glasenberg told reporters trade flows were routing coal exports around Chinese bans on Australian coal, increasing the cost to users through higher freight rates.
“You are altering trade routes. Normally trade routes follow the cheapest coal going to the right destination so the consumer gets the lowest potential price,” he said.
“If the trade route for coking coal from Australia should go to China because that’s the lowest freight rate, that’s where it should go. Unfortunately it’s not going there because of the spat between Australia and China, so China has to go to the United States to buy its coking coal.
“The freight rate may be higher, so the consumer in the end bears the burden and hopefully the producer doesn’t because it’s just a matter of moving the deck chairs. Long term, does it help anyone? I don’t think so.”
But Mr Glasenberg joined BHP boss Mike Henry in saying he did not believe China would lift its bans on Australian coal in the near future, despite the increased costs to China’s steel mills.
“In the context of the battle the amount they’re paying for coking coal is so small in the Chinese economy I’m not sure that would affect it,” he said.
“I agree with Mike Henry that I don’t see the Chinese relenting at the moment.”
Mr Glasenberg said he was certain China would ensure the giant Simandou iron mine in Guinea was developed, a move that would put pressure on Pilbara iron ore producers.
“I cannot believe the Chinese won’t take the opportunity to develop Simandou,” he said.
“Simandou could become a 200 million to 250 million tonne exporter, there is no reason why they wouldn’t do it and they will do it.
Glencore declared a $US1.9bn loss for the year, on the back of $US6.3bn worth of impairments across its global mining and energy portfolio. It reported underlying earnings before interest and tax of $US4.42bn for the year.