The world’s war on coal is making its biggest producers a lot richer, at least for now. Anglo American Plc, Glencore Plc and BHP Billiton Ltd. are generating the highest profits in years from their coal mines. Income for the 37 coal producers tracked in a Bloomberg Intelligence index was the highest in six years.
It all comes down to the simplest equation in business: supply and demand. With governments from Asia to Europe setting stricter pollution limits as the climate change debate intensifies, output of the planet’s dirtiest fuel is dropping.
Some of the more significant declines are occurring in China, the top mine operator, and financing for new supplies is drying up. That’s creating a windfall for the producers who remain.
“It’s a perverse consequence” of policies intended to combat climate change, said Julian Treger, co-founder of activist investor Audley Capital Advisors LLP. “It’s going to be very difficult for funders to provide capital to bring new coal assets online. We have a very interesting supply and demand picture being set up.”
Anglo American, which not long ago wanted to unload its coal assets, has seen income from the business triple since 2015 to become the mining company’s most profitable commodity. Last year, Glencore reported earnings from the fuel more than doubled, while BHP Billiton said it surged sixfold.
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