Glasenberg defends Glencore coal production cut

GLENCORE CEO Ivan Glasenberg has staunchly defended the company’s decision to cut 15 million tonnes out of production from its Australian coal mines claiming that it didn’t want to “cannibalise our own production”.
Glasenberg defends Glencore coal production cut Glasenberg defends Glencore coal production cut Glasenberg defends Glencore coal production cut Glasenberg defends Glencore coal production cut Glasenberg defends Glencore coal production cut

Glencore chief Ivan Glasenberg

Lou Caruana

The move will continue to have a positive effect on coal pricing, he told an analyst’s meeting.

“We are a big part of the coal supply side,” he said.

“We represent 150 million tonnes in managed production in a billion-tonne seaborne market. And as we've always said as a company, we do not want to cannibalise our own production, and therefore we're not going to put our tonnes where we believe it can have a negative effect on pricing, if demand is not there for those extra tonnes.

“So, we have taken the decision that we will cut back 15 million tonnes during 2015. We believe that it will create an oversupply in the market.

“And we didn't want to cannibalize our existing 150 million tonnes that may have negative effect on pricing. So, therefore, we've taken this decision. We did this last year. We did it in December last year, where we had the three-week shutdown.

“It had a positive effect on the pricing, and we will continue doing this if we believe we are oversupplying the market. So, therefore, we have a bit of control on that. So, we'll continue doing it. So, overall, we believe with the right commodities, there's no big supply coming in these commodities. And as long as demand keeps growing, we believe we're in the right spot.”

Glasenberg said none of those cuts are loss-making.

“All our coal is profit-making, but we have taken the decision even though [they are] profit-making tonnes, we'd rather remove it from the market because we believe those tonnes will affect the market price and affect the balanced managed tonnes of 150 million tonnes of which around about 120 as equity.

“But of those tonnes, we will affect that 150 million tonnes so much that the loss of profit on the 50 million tonnes cut doesn't … compensate for … how it would hurt your 150 million managed tonnes. So, that is very important when you look at the two.”

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