Glencore vows to cap coal output as profits tumble

ZURICH: Mining giant Glencore pledged to limit coal production and instead prioritise investment in other commodities as part of a move towards cleaner energy and transportation.

The decision by the one of the world’s biggest coal producers comes as activist shareholder groups try to pressure companies to cut back on the major producer of carbon dioxide (CO2) emissions, a key driver of global warming.

“To meet the growing needs of a lower carbon economy, Glencore aims to prioritise its capital investment to grow production of commodities essential to the energy and mobility transition and to limit its coal production capacity broadly to current levels,” a company statement said.

In 2018, coal generated US$ 12.3 billion (10.9 billion euros) in sales for the Swiss-based group, a jump of 26 per cent as Glencore raised output by seven per cent via Australian acquisitions.

Glencore, which also trades commodities, said it was wellpositioned to support the transition to a lower- carbon economy with a portfolio that includes copper, cobalt, nickel, vanadium and zinc.

Those metals are used to produce batteries, the cost and performance of which will likely be key in determining whether electric vehicles displace petroland diesel-fuelled vehicles.

The coal announcement came as Glencore announced that 2018 net profits tumbled 41 per cent to US$ 3.4 billion (3 billion euros).

Glencore said it believes that energy and mobility transformation “is a key part of the global response to the increasing risks posed by climate change”.

“We believe it’s in the best interest of the company,” chief executive officer Ivan Glasenberg added during a press conference.

Globally, coal use accounts for 40 per cent of CO2 emissions and is on the rise after declining slightly from 2014 to 2016. Glencore said it supported international efforts to limit the rise in global temperatures while also ensuring universal access to affordable energy.

The Church of England and the Climate Action 100+ group of institutional investors welcomed the news, saying it was ‘a first for the mining industry’.

“Investors will now want to hold the company to its commitments and to ensure that the methodology for determining the company’s alignment with the Paris goals is robust,” they said in a statement.

They were referring to the Paris Agreement on climate change that aims to limit global temperature rises to well below 2˚C (3.6 Fahrenheit).

The pledge to limit its coal output came after Glencore recently increased its holdings by buying stakes in a couple of coal mines from Rio Tinto in Australia.

The integration of the Hail Creek and Hunter Valley should take Glencore’s coal production to 145 million tonnes in 2019 from 129.4 million last year.

Glencore said it would review its membership in trade associations in line with its climate change positions. In its results statement, Glencore highlighted its preferred measure of operating profit – adjusted earnings before interest, tax, depreciation and amortisation costs – which gained eight per cent to a record US$ 15.8 billion. — AFP