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Glencore’s Coal Earnings Slide Despite Production Growth

/ Free, GLEN.LN, Thermal Coal / By

Glencore’s coal division saw a significant drop in earnings in 2023, with adjusted EBITDA falling to $7.97 billion compared to $17.92 billion in 2022. While coal production increased 3% to 113.6 million tonnes, lower margins and reduced thermal coal prices impacted profitability.

Key takeaways:

  • Earnings: $7.97 billion EBITDA on $16.50 billion revenue (2023), down from $17.92 billion EBITDA and $27.51 billion revenue (2022).
  • Production: 113.6 million tonnes (2023), up from 110.0 million tonnes (2022).
  • Margin: 48% (2023), down from 65% (2022).
  • Largest contributor: Australian thermal coal mines ($6.05 billion EBITDA, $10.77 billion revenue).
  • Acquisition: 77% stake in Teck Resources’ Elk Valley Resources for $6.93 billion (completion expected in September 2024).
  • Outlook: Stable production (110 million tonnes) in 2024.
  • Global coal demand: 7% growth, driven by Asia-Pacific (+16% import increase).
  • Global pig iron production: 1% increase, with Asian growth offsetting declines elsewhere.

Earnings breakdown:

  • Australian thermal coal: $6.05 billion EBITDA, $10.77 billion revenue (down from $11.41 billion and $16.89 billion in 2022).
  • Australian met coal: $0.94 billion EBITDA, $1.91 billion revenue (down from $1.35 billion and $2.46 billion in 2022).
  • Colombian coal: $0.67 billion EBITDA (down from $3.60 billion in 2022).
  • South African coal: $0.38 billion EBITDA (down from $1.65 billion in 2022).

Market and future developments:

  • Glencore realized an average thermal-equivalent price of $141/tonne in 2023.
  • China’s increased coal imports (100 million tonnes) helped boost demand.
  • Global seaborne thermal coal demand grew by 7%, driven by Asia.
  • Glencore expects steady production in 2024 but anticipates lower overall earnings due to market rebalancing.
  • The acquisition of Elk Valley Resources is expected to strengthen Glencore’s met coal position.

Overall, Glencore’s coal division faces challenges despite production growth. Lower margins and market dynamics negatively impacted earnings in 2023. However, the company’s expansion plans and focus on Asia’s growing coal demand could offer future opportunities.

Source: TheCoalTrader, AI generated

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