Ivan Glasenberg, the billionaire running commodities supplier Glencore Xstrata Plc, is investing more in thermal coal than his three closest competitors combined even as investors warn the fuel’s outlook is deteriorating.
The former coal trader is betting on prices rebounding from a three-year drop. The Swiss company, in which he owns 8 percent, is spending $4.75 billion, largely on projects inherited in the takeover of Xstrata Plc, to boost output 21 percent through 2016. At the same time, BHP Billiton Ltd., the biggest mining company, Rio Tinto Group and Anglo American Plc, have stalled new investments, sold mines or halted others.
Glasenberg, 56, is deepening his bet on coal as appetite wanes among some investors for companies that extract fuels blamed for making the biggest contribution to climate change. Share prices of the four largest single-commodity thermal-coal producers have tumbled an average 25 percent in the past 12 months as an explosion in lower-cost supplies of U.S. shale gas compounds a weaker outlook for exports to China.
“This is a classic counter-cyclical acquisitive strategy that Ivan Glasenberg has made his name in,” said Paul Gait, a mining analyst in London at Sanford C. Bernstein Ltd. who rates Glencore outperform. “Everybody is bearish thermal coal.”
Competitors are “running their business according to a balance-sheet constraint that is either to preserve capital and credit ratings rather than a desire to maximize value,” Gait said. “That creates opportunities.”
Coal Export Forecast
Glencore paid Rio about $500 million for 25 percent of Australia’s third-biggest thermal-coal mine in October, five months after completing the acquisition of Xstrata for $29 billion to gain control of the fuel’s biggest exporter. The Xstrata deal bolstered reserves eightfold to almost 4 billion tons amid a global supply glut.
Spokesmen for BHP, Rio and Glencore declined to comment for this story.
Glencore, based in Baar, forecasts that demand for coal exports will rise 12 percent by 2016 from this year and has a “positive medium-term market outlook” as less profitable mines close, removing supply. That view conflicts with the position of BHP Chief Executive Officer Andrew Mackenzie, who said in October the company had halted spending on new mines.
“We’re not investing in thermal coal at the moment,” Mackenzie said, adding the Melbourne-based company isn’t planning to sell coal assets. “The message in thermal coal is to maximize returns with what we’ve got.”
Chinese Demand
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