Glencore, the world’s biggest exporter of power-station coal, will stop production at its Australian mines for three weeks as prices languish at a five- year low.
About 8 000 workers will be forced to take annual leave after mining giant Glencore decided it will shutter its 16 Australian coal mines, including five in Queensland, for three weeks next month in another sign of the desperate state of the market.
Reigning back supply
The decision to halt operations starting in mid-December will rein in output in Australia by about five-million metric tons, the company said in a statement on Friday.
That’s equal to about 6% of Glencore’s Australian coal production last year.
Glencore, led by Chief Executive Officer Ivan Glasenberg, is tapping the brakes on what has been a steady period of growth in coal production.
Weak pricing environment
“This is a considered management decision given the current oversupply situation and reduces the need to push incremental sales into an already weak pricing environment,’’ Glencore said in a statement.
“We remain confident in demand growth for our products and believe that the supply and demand balance will be restored in the medium term.
Glencore has yet to say what will happen to the thousands of workers at the mines during the shutdown.
“There is a broad, bearish tone in the market and investors are focusing on the negative headlines,” Daniel Hynes, senior commodity strategist at Australia and New Zealand Banking Group, told Australia’s news.com. “So whether this actually supports the short-term price is debatable, but on a fundamental basis it will help.”
Glencore, which proposed a merger with Rio Tinto Group in July, reported earlier this month that it increased coal output by 9.2% in the third quarter to 40.2 million tons, driven by expansion at energy coal mines in Australia.
“We remain confident in demand growth for our products and believe that the supply and demand balance will be restored in the medium term,” the company said on Friday.
In the iron ore industry, Glasenberg has argued that his two biggest rivals have got it wrong by feeding a global glut.