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The Star
7 hours ago
- Business
- The Star
China's copper boom under threat as miners test bargaining power
This photo taken on May 17, 2025 shows the Dexing Copper Mine, an open-pit copper mine in Dexing, in China's central Jiangxi province. China's refined copper output is set to rise ten per cent in the first half of this year and nearly five per cent for the full year. - AFP BEIJING: The unrelenting expansion of Chinese copper processing capacity over the past few years has now become a global headache, as smelters scramble to secure the ore they need to produce the vital industrial metal. Output in the world's top producer of the refined metal has ballooned to a record this year, even in the face of trade tensions wars that are clouding the outlook for demand. The resulting competition has handed bargaining power to some of the world's largest miners. Copper treatment charges, typically a key earner for processors, have plunged deep below zero on the spot market. Chilean miner Antofagasta Plc has proposed negative charges for contracted supplies to smelters in the second half. The fraught situation for smelters worldwide is fueling expectations of cuts - Glencore Plc shut a facility in the Philippines in February. It's also focusing market attention on the surprising resilience of China's output, and raising the question of how long that can last. Analysts and industry executives say China's output is more resistant to financial pressures because it is now dominated by state-owned producers and by relatively large, efficient and low-cost smelters. Three major new plants were opened just last year, more than offsetting the pain felt by more modest operations. But there's also a still-substantial segment of China's market that is made up of smaller, privately owned smelters with more exposure to a tightening spot market. CRU Group says those plants account for about a quarter of the country's output. "Even if you have very deep pockets and are willing to operate at a loss, at the end of the day you might have to cut production because you simply cannot get the copper concentrate,' said Craig Lang, principal analyst at CRU Group. The stakes are high for the global copper smelting industry. With all high-cost facilities facing losses, every tonne that resists financial pressure in China means more pain for those elsewhere. Spot treatment charges to process concentrate fell to negative levels in December, and reached minus-$60 a tonne last month. The fees are deducted from the cost of concentrate and ordinarily make up a large chunk of smelter revenues. Term supplies are now threatening to slide into negative territory too, meaning smelters are effectively paying more for copper ore than the value of the metal contained in it. In February, when fees were less punitive than they are now, Glencore Plc Chief Executive Officer Gary Nagle said he wouldn't keep open loss-making copper plants. The company mothballed a smelter in the Philippines and is cutting costs at plants in Canada. Older European copper smelters could be at risk, while Japanese plants may be sheltered due to their parent companies' stakes in Chilean mines, said Grant Sporre, an analyst at Bloomberg Intelligence. "It's going to be a tough battle for survival.' Granted, the plunge in fees is partly due to relatively slow growth in mine output worldwide - but it's primarily driven by the rapid increase in smelting capacity. China's refined copper output is set to rise ten per cent in the first half of this year and nearly five per cent for the full year, according to researcher Shanghai Metals Market. The argument for China's resilient output rests largely on the belief that state-owned plants are protected because local governments want to safeguard jobs and the economy. "This is a consequence of an economic model that is less responsive to prevailing market conditions as plants can run on very thin margins - or even make losses - for extended periods of time,' Savant, a joint venture by Marex Group Plc and geospatial analysis company Earth-i, said in a note last month. Although cutting overcapacity across the Chinese economy has become a more important policy priority for Beijing recently, so called 'future-friendly' industries like copper, a metal required for electrification and so for the energy transition, are being given more leeway than sectors seen to be in structural decline, such as oil refining. For producers outside China, there is no such cushion. The suspension of Ivanhoe Mines Ltd.'s Kakula copper mine in central Africa has been a blow to ore supply - and at the same time developments like the ramp-up of Freeport McMoRan Inc.'s Manyar smelter in Indonesia are adding more refining capacity to the market. Big smelters may still be able to maintain production for now, following some years of healthy cash flow, said Yongcheng Zhao, an analyst at Benchmark Minerals Intelligence Ltd. The less-efficient ones, though, are at risk. - Bloomberg
Business Times
10 hours ago
- Business
- Business Times
China's copper boom under threat as miners test bargaining power
[BEIJING] The unrelenting expansion of Chinese copper processing capacity over the past few years has now become a global headache, as smelters scramble to secure the ore they need to produce the vital industrial metal. Output in the world's top producer of the refined metal has ballooned to a record this year, even in the face of trade tensions wars that are clouding the outlook for demand. The resulting competition has handed bargaining power to some of the world's largest miners. Copper treatment charges, typically a key earner for processors, have plunged deep below zero on the spot market. Chilean miner Antofagasta has proposed negative charges for contracted supplies to smelters in the second half. The fraught situation for smelters worldwide is fuelling expectations of cuts – Glencore shut a facility in the Philippines in February. It's also focusing market attention on the surprising resilience of China's output, and raising the question of how long that can last. Analysts and industry executives say China's output is more resistant to financial pressures because it is now dominated by state-owned producers and by relatively large, efficient and low-cost smelters. Three major new plants were opened just last year, more than offsetting the pain felt by more modest operations. But there's also a still-substantial segment of China's market that is made up of smaller, privately owned smelters with more exposure to a tightening spot market. CRU Group says those plants account for about a quarter of the country's output. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up 'Even if you have very deep pockets and are willing to operate at a loss, at the end of the day you might have to cut production because you simply cannot get the copper concentrate,' said Craig Lang, principal analyst at CRU Group. The stakes are high for the global copper smelting industry. With all high-cost facilities facing losses, every ton that resists financial pressure in China means more pain for those elsewhere. Spot treatment charges to process concentrate fell to negative levels in December, and reached minus US$60 a tonne last month. The fees are deducted from the cost of concentrate and ordinarily make up a large chunk of smelter revenues. Term supplies are now threatening to slide into negative territory too, meaning smelters are effectively paying more for copper ore than the value of the metal contained in it. In February, when fees were less punitive than they are now, Glencore chief executive officer Gary Nagle said he wouldn't keep open loss-making copper plants. The company mothballed a smelter in the Philippines and is cutting costs at plants in Canada. Older European copper smelters could be at risk, while Japanese plants may be sheltered due to their parent companies' stakes in Chilean mines, said Grant Sporre, an analyst at Bloomberg Intelligence. 'It's going to be a tough battle for survival.' Outlook worsening Granted, the plunge in fees is partly due to relatively slow growth in mine output worldwide – but it's primarily driven by the rapid increase in smelting capacity. China's refined copper output is set to rise 10 per cent in the first half of this year and nearly 5 per cent for the full year, according to researcher Shanghai Metals Market. The argument for China's resilient output rests largely on the belief that state-owned plants are protected because local governments want to safeguard jobs and the economy. 'This is a consequence of an economic model that is less responsive to prevailing market conditions as plants can run on very thin margins – or even make losses – for extended periods of time,' Savant, a joint venture by Marex Group and geospatial analysis company Earth-i, said in a note last month. Although cutting overcapacity across the Chinese economy has become a more important policy priority for Beijing recently, so called 'future-friendly' industries such as copper, a metal required for electrification and so for the energy transition, are being given more leeway than sectors seen to be in structural decline, such as oil refining. For producers outside China, there is no such cushion. The suspension of Ivanhoe Mines' Kakula copper mine in central Africa has been a blow to ore supply – and at the same time developments such as the ramp-up of Freeport McMoRan's Manyar smelter in Indonesia are adding more refining capacity to the market. Big smelters may still be able to maintain production for now, following some years of healthy cash flow, said Yongcheng Zhao, an analyst at Benchmark Minerals Intelligence. The less-efficient ones, though, are at risk. BLOOMBERG
Yahoo
25-05-2025
- Business
- Yahoo
Forecast: in just one year Glencore shares could turn £10,000 into…
My Glencore (LSE: GLEN) shares are pants. No, I'll rephrase that. They're absolute pants. The mining giant has fallen 44% over the last 12 months, making it the worst-performing stock on the entire FTSE 100 in that time. That's blown a big hole in my self-invested personal pension (SIPP), and my confidence as a stock-picker. Even the dividends haven't softened the blow. Commodity stocks like Glencore have been hit by slowing demand from China, which once sucked up more than half the world's raw materials. Its economy is nurturing a huge hangover from decades of debt-fuelled infrastructure building. And there's no major recovery in sight. Add in the prospect of a US recession and ongoing nervousness about global trade, and it's hard to see where demand will come from next. Glencore operates in a highly cyclical sector, so I've got no plans to sell at the bottom. But I've been looking for reasons to hold what I've got. I can't see many. 2024 results published on 19 February didn't do it for me, despite CEO Gary Nagle's claims that it was a 'strong year'. Adjusted EBITDA earnings fell 16% to $14.4bn, hit by lower average energy coal prices. Net debt more than doubled from $4.9bn to $11.2bn. At least Nagle announced a top-uop share buyback of $1bn, to be completed by August. That's slim consolation though. Yet others are more optimistic. The 16 analysts offering a one-year share price forecasts have produced a median target of 381p. If correct that would imply a bumper 41% gain from today's 269p. Add the forecast yield of 3.09%, and that could mean a total return of around 45%. Which would turn £10,000 into £14,500. It sounds good, even though it would barely get me back to square one. Of course, many of those forecasts will be out of date. On 1 May, Berenberg revised its target price down from 400p to 380p. It cited a disappointing start to 2025, with copper and zinc production hit by mine sequencing, weaker grades and bad weather. Even Glencore's prized marketing arm is now expected to deliver only mid-range earnings. The broker also cut its earnings-per-share forecast for 2025 by. That's not encouraging. But it still maintained its Buy rating. That's not one I'd issue right now. When shares rise, it's easy to imagine them rising forever. When they fall, it's hard to picture a recovery. I certainly can't see one happening rigiht now, but perhaps I'm being too gloomy. Recoveries don't wait for permission, especially in this sector. They tend to arrive unannounced. The only way to benefit is by owning the shares when nobody else wants them, and hoping things will change. I can't bring myself to average down today. Instead, I'm digging in. I suspect that Glencore shares are set to remain pants for a while longer, but others think differently. Let's hope they're right and I'm wrong. Again. I'd happily take a second hit to my stockpicking confidence, if only my Glencore shares would climb. The post Forecast: in just one year Glencore shares could turn £10,000 into… appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Harvey Jones has positions in Glencore Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Sign in to access your portfolio
Yahoo
02-03-2025
- Business
- Yahoo
Coal's Four-Year Lows Hide a Coming Global Supply Squeeze
(Bloomberg) -- Languishing global prices today mask a very different future for the world's most-consumed source of power. Cuts to Section 8 Housing Assistance Loom Amid HUD Uncertainty The Trump Administration Takes Aim at Transportation Research Shelters Await Billions in Federal Money for Homelessness Providers NYC Office Buildings See Resurgence as Investors Pile Into Bonds Hong Kong Joins Global Stadium Race With New $4 Billion Sports Park Australian thermal coal contracts, the benchmark for Asia, are hovering close to $100 a ton thanks to a mild winter and global oversupply, a price level last seen in May 2021, before the energy-market upheaval that followed Russia's invasion of Ukraine. While that is battering producers and will cheer those predicting the end of the dirtiest fossil fuel, it's a trough that may not last. Investment in new production has dwindled in much of the world as shareholders and banks increasingly refuse to approve new spending on projects. Demand, however, continues to rise in India and China, outpacing breakneck rates of expansion in solar and wind, while even developed countries look to coal to help power the artificial intelligence boom. The combination portends a sharp rebound for internationally traded coal that risks adding to the economic strain already being felt by households and manufacturers in emerging economies, still heavily dependent on the fuel. It could also make coal profitable for longer — potentially vindicating those who have bet on the fuel's resilience while threatening climate targets. 'A lot of our minority joint venture partners around the world, more particularly in Australia, wanted to get out of steam coal,' Gary Nagle, chief executive officer of Glencore Plc said during an earnings call last month, explaining the commodities trader and miner's commitment to the fuel and its move to buy out partners in recent years. 'At the time, coal was a four-letter word. It seems in today's world, coal is no longer a four-letter word.' The supply squeeze is not hard to explain. Banks have cut back on coal lending, either on ethical grounds or because of financiers' concerns they'll be funding assets that will be shut long before they can generate a profitable return. With scant new capacity coming in for seaborne coal — new mines tend to serve Indian or Chinese domestic demand — the market is looking tighter than many expected over the medium to long term. Even lofty levels hit in 2022, after Russian tanks rolled into neighboring Ukraine and left Europe scrambling for alternative energy supplies, weren't enough to prompt producers to build. 'In previous price highs, that would've stimulated or incentivized a lot of new projects,' said Steve Hulton, senior vice president of coal markets at Rystad Energy. 'We haven't seen any of that happen. And we saw more players took the opportunity to actually exit stakes.' If anything, he said, miners have opted to buy existing capacity — but not to develop from scratch. Worldwide, companies have proposed new projects that will supply about 1.8 billion metric tons per year of thermal coal to feed power plants — but 76% of that is in China and India. Of 70 nations tracked by Global Energy Monitor, only 10 have plans to boost output by more than 10 million tons. Most aren't developing any new mines at all. A dearth of supply, subsequent disruptions and extreme price strikes should accelerate demand destruction in price-sensitive markets — good news for the climate. But it also signals a turbulent endgame for coal, according to Rory Simington, an analyst at Wood Mackenzie Ltd., rather than a slow and steady decline. The trouble is that while supply has been constrained, demand has kept rising, as millions more homes are electrified, cars are charged and factories are built. Surging green energy is reducing the need for fossil fuels — but not enough. In India alone, coal demand is expected to climb to 1.5 billion tons by the year through March 2030, according to estimates by the coal ministry, an increase of about 3% every year. Tech companies are building data centers to support cloud computing and AI. Many utilities were caught flat-footed by this shift and are now relying more heavily on coal to keep enough juice flowing across the grid. In the US and Japan, they're extending the life of plants that had been scheduled to close. Germany is hanging on to a fleet of mothballed coal plants because it's taking longer than expected to build the new gas plants needed after the country closed its last nuclear facility in 2023. No surprise then, that the International Energy Agency has revised its coal demand outlook higher in its last four annual reports — and has reversed its view that demand would peak. Global demand is slated to rise 1% through 2027, the organization said in a December report. For now, there is little for producers to cheer. China, which mines and burns half the world's coal, is facing swelling inventories since the start of last year after producers and power plants stocked up to avoid a repeat of the energy shortages that plagued the economy in 2021 and 2022. Purchasing remained relatively strong through the end of the year as companies sought to cope with winter demand. But the season was mild and industrial power demand has slowed, leading stockpiles to bulge. Industry information provider China Coal Resource estimated total inventories rose to 665 million tons by the end of December, up 21% from the previous year and enough to supply the nation for more than a month. China Shenhua Energy Co., a unit of the nation's biggest coal firm, has stopped buying foreign coal shipments from the spot market as it seeks to draw down high port inventories and make use of domestic production. China's largest coal associations have called for companies to adjust in order to prevent 'severe' oversupply amid falling prices. Japan and South Korea also had relatively normal winters, keeping North Asian demand in check. 'We had just come through a period where people were aggressively buying,' Wood Mackenzie's Simington said. 'Then we had a mild winter and now stockpiles are full everywhere.' The lull looks likely to be short-lived. Hotter weather could quickly turn the picture as air conditioning fuels demand. And Chinese coal requirements continue inching higher, with the IEA expecting a 1.3% increase through 2027. The organization had previously expected China's demand to peak in 2023. As Newcastle coal prices have fallen, about 10% of export mines have become unprofitable at below $110 a ton, Simington said. Some of those mines will likely halt output, which should also provide temporary support for prices. 'Structurally there are pressures, no doubt about it,' Simington said. 'But to date, the overall growth of energy demand has meant consumption of coal keeps being able to grow.' --With assistance from Rajesh Kumar Singh. Rich People Are Firing a Cash Cannon at the US Economy—But at What Cost? Can Dr. Phil's Streaming Makeover Find an Audience in the MAGA Era? Trump's SALT Tax Promise Hinges on an Obscure Loophole Warner Bros. Movie Heads Are Burning Cash, and Their Boss Is Losing Patience Walmart Wants to Be Something for Everyone in a Divided America ©2025 Bloomberg L.P. Sign in to access your portfolio
Yahoo
19-02-2025
- Business
- Yahoo
Glencore looks to leave London Stock Exchange as falls into loss
Swiss mining and commodity trading giant Glencore said Wednesday it was considering shifting its stock listing from London after it stumbled into a net loss last year on falling coal prices and writing down the value of assets. Meanwhile, with the threat of an all-out tariff war breaking out, the company said the uncertainty that creates is a short-term boon for its trading business but was not good in the long term for the global economy. "We are actively considering the right exchange for our shares," Glencore chief executive Gary Nagle said in a call with analysts after releasing its annual results. The company chose in 2011 to list on the London Stock Exchange, which was then considered the leading exchange for international mining groups. "We're not saying that the London Stock Exchange is bad," said Nagle. "What we're saying is: is there a better stock exchange to trade our securities?" he added, acknowledging that "the US is the leading stock market". The company's shares were down around five percent in London, having pared some of their initial losses. - Coal business takes a lump - The company earlier Wednesday reported $1.6 billion net loss for 2024 compared to a net profit of nearly $4.3 billion the previous year. The group took charges to write down the value in its accounts of its coal operations in South Africa, and the Koniambo nickel mine in New Caledonia. Accounting rules force companies to take such charges to reflect changes in the market value of their operations. Excluding such exceptional charges, the company said it would have posted a net profit of $3.7 billion. Nagle said in the statement that "operationally, 2024 was a strong year for Glencore" with its industrial mining operations meeting their performance targets. Adjusted operational earnings from these operations came in at $10.6 billion, a drop of 20 percent from 2023, which the company said was "primarily driven by lower energy coal prices". While mining rivals Rio Tinto or Anglo American have pulled out of coal mining, Glencore boosted its involvement in this market by buying Elk Valley Resources (EVR) from Canada's Teck Resources for $7 billion last year. Glencore's commodities trading business generated adjusted operational earnings of $3.2 billion, an eight percent drop from 2023 due to the "progressive normalisation of energy markets from the severe disruption and extreme volatilities seen in 2022/23". That disruption and extreme volatility in energy markets driven by Russia's invasion of Ukraine helped Glencore post a record profit of $34.1 billion, allowing it to return $7.1 billion to shareholders in dividends. Despite the net loss Glencore plans to distribute $2.2 billion to its shareholders via dividends and share buybacks. The group said it expects to receive in the coming months $1 billion in cash from the sale of its stake in Canadian grain handling company Viterra to Bunge, plus shares in the US-Swiss agribusiness. - 'Uncertainty creates opportunity' - Nagle said it is impossible to predict what will happen with tariffs, a day after Trump threatened 25 percent levies on autos. "What we do know is that uncertainty creates opportunity, uncertainty creates arbitrage options, it creates dislocation in the market, and when that happens we do well in our marketing business," he said, referring to the commodities trading business. "Although maybe in the long term these sort of tariffs may not be so good for global growth, in the short term it raises our ability to get better returns out of our marketing business," added Nagle. noo/rl/cw Sign in to access your portfolio
