Glencore Is Producing Coal Again After Its Christmas Shutdown

Photo: Luke Sharrett/Getty Images

Swiss mining giant Glencore has reopened its coal mines after shutting all production over the Christmas period in an effort to curb supply at a time when coal prices have fallen well below peak.

Restarting production today, thermal coal was trading at $US61.20 a tonne, down from just over $63 a tonne when Glencore’s three week Christmas shutdown began in mid-December.

Glencore is Australia’s largest coal miner and the decision to shut its operation over Christmas was made to avoid pushing extra tonnes into an oversupplied global market.

After an attempted merger with Rio Tinto last year every move Glencore makes is being watched carefully.

Glencore CEO Ivan Glasenberg last year had a crack at the expansion strategies iron ore majors, including Rio Tinto, BHP Billion and Vale, have taken. He said they are squeezing themselves by ramping up production at a time when commodity prices and Chinese demand are falling.

“We don’t want to oversupply and cannibalise our own business. If we do generate cash and we don’t find better ways to deploy it, we are owner-managers and we are happy to pay back some money to ourselves,” he said.

The decision to shut coal operations, creating an artificial tightness in the market by taking about 5 million tonnes away, could be seen as Glassenberg’s way of showing who’s boss.

Glencore is expected to make another move for a Rio merger in April when UK takeover laws allow.

Another option which both parties have reportedly considered is a joint venture over Rio and Glencore’s Hunter Valley coal operations. Rio owns the Mount Thorley Warkworth coal mine which is adjacent to Glencore’s Bulga operations in the area.

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