What does Glencore Xstrata see in coal that others don’t?

December 5, 2013 3:25 PM

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Despite recent warnings indicating the coal industry outlook is quickly deteriorating, Glencore Xstrata (LON:GLEN) is going full-speed with its plans to boost production of the fuel.

The miner and trading house giant is expected to spend more on coal than any of its three closest competitors, BHP Billiton (ASX:BHP), Rio Tinto (LON:RIO) and Anglo American (LON: ANGLO), reports Bloomberg.

Meanwhile BHP, the world’s largest mining company, Rio and Anglo have put all new coal investments on hold, sold mines or paused others.

A mounting number of analysts are questioning the wisdom of investing in the commodity. “Earning a return on incremental investment in thermal coal mining and infrastructure capacity is becoming increasingly difficult,” said Goldman Sachs earlier this year.

For others, CEO Ivan Glasenberg’s move makes total sense. “This is a classic counter-cyclical acquisitive strategy that Ivan Glasenberg has made his name in,” mining analysts Paul Gait told Bloomberg.

Global coal consumption is currently rising at an average rate of 1.3% per year, and the growth is primarily driven by demand from China, India, and other non-OECD countries.

Source: mining.com

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