Glencore poised to be S.Africa's No. 4 coal player
Glencore will make a leap to one of South Africa's top coal players with around 10 million tonnes a year of its own export grade thermal coal if it gains control of Optimum Coal Holdings and marketing rights to its output. Total coal exported by Glencore would grow to almost twice that much if coal handled by its marketing arm was included, industry sources said. Glencore, the world's largest commodity trader, is bidding for a controlling stake in OCH, South African's sixth largest coal producer. It has so far secured almost 24 percent of the shares but has a commitment to sell from shareholders representing at least 49% of OCH. A successful takeover of the firm and its marketing deals would lift Glencore to the No. 4 ranking of South African coal producer/exporters after Anglo American, BHP Billiton and Xstrata. Below are details of South African coal producers and exports. OCH will export roughly 5-5.5 million tonnes in 2011, based on its share of privately-owned Richards Bay Coal Terminal, which ships almost all of South Africa's export coal.
Glencore this year will export around 1.5 million tonnes of coal produced by its subsidiary Shanduka Coal plus 2- 2.7 million tonnes bought on a spot basis from smaller miners, a total of 4.2 million, sources close to the company said. South African coal exports are forecast at 63 million tonnes this year from RBCT, a figure which includes 4 million from the Quattro junior miners' export scheme. The remaining 59 million tonnes will be split between RBCT's shareholders. In comparison, the two currently largest coal shippers, Anglo Coal and BHP Billiton with their RBCT share holdings of 25.94% and 23.54% respectively, will ship roughly 15.3 million and 13.9 million tonnes in 2011, industry sources said. Xstrata, in which Glencore owns a 35% stake, will ship around 11.6 million tonnes from South Africa this year. Glencore and Xstrata separately market their production but Xstrata pays Glencore 50 U.S. cents a tonne for marketing advisory services on every tonne shipped from South Africa. BHP, which developed the Optimum and Koornfontein mines, but sold them in 2005, has a long-term offtake agreement for Optimum's export coal.
Mercuria Energy Trading has a long-term deal to market output from Koornfontein, also part of OCH. If Glencore gains OCH plus the marketing contracts, Glencore will secure a substantial tonnage of export coal. Initial steps have already been taken toward this although sources close to the company said last week that Glencore's interest in OCH was not contingent upon gaining the marketing rights. Some junior miners have actively lobbied for authorities to block Glencore's bid for OCH on the basis that the firm will have too dominant a position in the South African coal industry. But Glencore firmly believes that this acquisition does not have a negative impact on competition in the South African coal market, sources close to the company said. Some of the controversy over just how big a role Glencore plays in the South African coal industry stems from the company's trading activities. Glencore buys much more coal than it mines from a broad spectrum of other producers and sells it FOB Richards Bay in the same way as international trader competitors including Vitol, Cargill, Mercuria, Noble and Gunvor, but on a bigger scale.
"I make it just a touch below 20 million tonnes in Glencore's hands if they get Optimum -- it is a big number," a senior industry source said. "I remember in 2000 they (Glencore) loaded one out of three ships at Richards Bay and that was before they owned any mines," another senior industry source said. Not all the junior players are complaining. Glencore's move has been welcomed by other junior and some major players because Glencore is committed to long-term investment in mining in the country, unlike most of the big miners. "It's good to see someone from outside the country investing and backing South Africa. Glencore has for years provided a service to the juniors to allow a lot of coal to leave the country, to have it marketed, which otherwise would not have done so," the mining source said. RBCT currently has a nominal capacity of 72 million tonnes a year, rising to 91 million when the Phase V capacity awarded to junior miners comes into operation, at which point Glencore's 20 million tonnes will be a smaller percentage, unless the company has absorbed more mines by then.
Source: Reuters
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