Miners post record profits on bumper demand

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Both Whitehaven and Glencore are big beneficiaries from the chaos in commodity markets caused by Russia’s invasion of Ukraine. Their decision to keep mining coal while rivals exited has paid off handsomely, as the dirtiest fuel surged to a record last year. Glencore’s sprawling trading business has also benefited from sharp price swings and dislocations in energy markets across the world.

“The unprecedented developments in global energy markets were material drivers for both our marketing and industrial businesses,” Glencore chief Gary Nagle said. “Demand for many of our commodities is likely to remain healthy, while supply constraints persist and inventories remain relatively low.”

Whitehaven is betting Russian sanctions will keep the price of the black mineral high in Europe for several years after it booked a record half-year $1.8 billion profit. The coal miner generated $3.8 billion in revenue from its coal exports over the half-year to December.

“Demand for high-quality seaborne thermal coal remains strong and while we have seen some cyclical price softening moving into the second half of the year, we expect that high-CV coal prices will continue to be well-supported throughout calendar year 2023,” Flynn said.

The company is one of Australia’s biggest independent coal producers, extracting the material from several mines in New South Wales.

While a mild winter in northern Asia and Europe has caused coal prices to soften, sanctions against Russia have forced the pariah state to move out of its traditional European and Japanese markets, creating a gap for companies like Whitehaven and Glencore.

The price of metallurgical coal, used to make steel, has also strengthened after China lifted its COVID restrictions and China-Australia trade reopened.

Glencore is the first of the big diversified miners to post 2022 earnings. While other producers are also making big profits, Glencore’s huge coal exposure sets it apart. That’s a reversal from previous years when the company typically lagged mega miners BHP Group and Rio Tinto Group because it doesn’t produce any iron ore.

Now, Glencore has the advantage. Coal prices spent much of last year at record levels as utilities curb imports from Russia due to the war in Ukraine, tightening the amount of available supply, while surging natural gas prices increase demand for other energy sources.

With debt hovering around zero, Glencore said it will make a record payout to shareholders of $7.38 billion dividend, a top-up payment of $723.95 million and buyback of $2.17 billion.

Whitehaven, too, is returning equity to shareholders in the form of share buybacks and an interim dividend of $641.4 million – a total payout ratio of 36 per cent of its profit after tax for the first half of the financial year.

With Bloomberg

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