South Africa: Glencore reports a 7% fall in coal production

Glencore said on Thursday that its thermal coal production in South Africa had fallen by 7% in 2024, to 16.6 million tonnes compared with the previous year. This reduction is part of a strategy to adapt sales to available rail capacity.

Looking ahead to 2025, the group has indicated that it could increase coal production if rail capacity improves. There have been positive signs with the increase in traffic on the rail line between Mpumalanga and Richards Bay. Transnet Freight Rail (TFR), the state-owned rail and port company, managed annualised coal exports of between 52 and 57 million tonnes in the last six weeks of 2024.

South Africa's total coal exports have increased for the first time in seven years, rising by 10% in 2024 to 52.1 million tonnes from just over 49 million tonnes the previous year, according to data provided by Richards Bay Coal Terminal (RBCT).

Glencore has published its fourth quarter and full year production report, in which it indicates a decline in copper, cobalt, zinc, nickel and thermal coal production in 2024, in line with its forecasts. Copper production fell by 6% to 951,600 tonnes in 2024, compared with 1.01 million tonnes in 2023, reaching the lower end of the company's forecast range.

Copper, used in electric vehicle batteries, green energy plants and data centres, is a strategic metal. Declining grades in existing mines are likely to exacerbate the expected supply shortfall in the face of growing demand linked to the energy transition.

Glencore will provide its production forecasts for 2025 and beyond when it publishes its annual financial results on 19 February.

The company had indicated that its marketing earnings before interest and tax (EBIT) for the full year should be between 3 and 3.5 billion dollars, approaching the upper end of its long-term forecast range of between 2.2 and 3.2 billion dollars.

Its commercial division, which includes coal, oil, liquefied natural gas and metals, achieved a record profit of 6.4 billion dollars in 2022.

Glencore has maintained its coal business after acquiring the coking coal assets of Teck Resources and obtaining the support of the majority of its investors, who are convinced of the profit potential of fossil fuels.

Glencore's steelmaking coal production has increased from 7.5 million tonnes to 19.9 million tonnes in 2024. However, its total thermal coal production has fallen, reaching 99.6 million tonnes in 2024, compared with 106.1 million tonnes in 2023.

Glencore's merger and acquisition ambitions will no doubt be at the centre of discussions when it presents its financial results next month. Rumours are circulating that Glencore entered into discussions with Rio Tinto in October and November 2024 regarding a potential merger between the two groups.

However, a number of analysts are questioning the feasibility of such a deal, particularly in view of Rio Tinto's position, which is moving away from coal, and the marked cultural differences between the two companies.

So far, neither Glencore nor Rio Tinto have commented on this speculation.