“Make your mind up, Glencore,” says Alistair Osborne in The Times. The FTSE 100 commodities giant, which is the world’s biggest listed coal producer, has scrapped plans to spin off its coal business. “One day coal is a filthy commodity” that harms a blue-chip’s environmental, social and governance (ESG) credentials, the next it is declared “a delightful mineral”, cash-generative and with a role to play in the energy transition.
Many energy companies and miners announced plans to step away from fossil fuels amid the 2021 ESG “frenzy”, say Harry Dempsey and Emma Dunkley in the Financial Times. Most greenhouse gas emissions come from fuels burnt for energy and heating, and coal accounts for more than any other source.
Over the past 12 months, however, some big investors have concluded that ESG was a “fad”. Why? Money talks and coal is still a cash spinner. Bank RBC estimates the fuel will net Glencore about $6 billion in 2024, roughly a third of total earnings, notes Karen Kwok on Breakingviews.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Is coal back in business?
The energy crisis that followed Russia’s 2022 invasion of Ukraine prompted investors to re-evaluate fossil fuels. A “war premium” and surging costs for natural gas (coal’s main competitor) saw thermal coal benchmarks top $400 a tonne two years ago, says a report from the International Energy Agency. Prices have since slipped about two-thirds from those highs. Newcastle coal futures, the Asian benchmark, are currently trading above $145 a tonne. Greater use of green alternatives should see coal demand first “plateau” and then gradually decline. “Global coal consumption in 2026 is set to be 2.3% lower than in 2023.”
Waning consumption comes as coal production hits new highs, says Megha Mandavia in The Wall Street Journal. Top producers Indonesia and Australia ramped up exports last year, with global output increasing 1.8% to a record 8.7 billion tonnes in 2023. “Coal’s glow has somewhat dimmed” as the resulting glut depresses prices.
Rich countries are rapidly decarbonising – both the US and EU slashed coal consumption by more than a fifth in 2023, says The Economist. But prices are still higher than they were before the 2022 energy crisis. Developing countries are replacing demand lost in the rich world. China, India and Southeast Asia consume three-quarters of global supply, compared with a third in 2000. Emerging economies are also transitioning away from coal, but supply looks set to contract before demand does. ESG concerns have deterred banks from financing new mines and “acquiring permits... is hellish”. With demand and supply in a volatile race to the bottom, some speculators spy an opportunity to turn a profit. But trading coal over the next few years will be a risky game.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Nationwide promises to protect all its branches from closures until at least 2030The building society has extended its pledge to keep all high street Nationwide and Virgin Money branches open, now until at least 2030.
-
Could dividend tax nearly double in the Budget?Self-employed directors and investors, including pensioners, who get an income from company shares would be hit if the rumoured move to hike dividend tax goes ahead.
-
STS Global Income & Growth: Buying quality at a discountInvestors should consider STS Global Income & Growth to diversify away from mega-cap tech
-
'We still live in Alan Greenspan’s shadow'When MoneyWeek launched 25 years ago, Alan Greenspan was chairman of the Federal Reserve. We’re still living with the consequences of the whirlwind he sowed
-
Venture capital trusts that offer growth, income and tax reliefOpinion Alex Davies, founder of high-net-worth investment service Wealth Club, picks three venture capital trusts where he'd put his money
-
Go for growth: how to invest in emerging marketsDeveloping countries offer investors compelling long-term economic prospects, says David Prosser
-
How to invest in private equityNew forms of private equity funds give access to ordinary investors of more modest means. Should they rush in?
-
Isaac Newton's golden legacy – how the English polymath created the gold standard by accidentIsaac Newton brought about a new global economic era by accident, says Dominic Frisby
-
Investing in AI – the ultimate bubbleIs it “different this time”, or are we in the mother of all bubbles? The economics of AI should give investors pause for thought, says Dan McEvoy
-
Why MoneyWeek studies at the Austrian school of economicsA heterodox tradition in economics has been a guiding light for MoneyWeek over our 25 years, says Stuart Watkins
