Trafigura and Glencore will both make a "managed transition" out of activities in coal as they seek to adapt their businesses to the Paris Agreement climate goals, the commodities traders' top executives said at the FT Commodities Global Summit Sept. 29.
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Trafigura's executive chairman and CEO Jeremy Weir said the company will "manage the transition" out of coal, which represents just 3% of its overall turnover, and is a business that hasn't been growing significantly. Glencore chairman Tony Hayward said Glencore will take "a managed decline approach" to its exposure to fossil fuels, which represents 25% of its business and is mainly in the coal area.
"Longer-term the outlook for coal is not positive at all and so therefore we'll go with that trend," Weir said during the virtual event. "We've got to support our customer base... but it is not our intention to invest any more into coal."
Trafigura traded 59.4 million mt of thermal and coking coal in 2019, according to information on its website.
Hayward said that different companies are adopting different strategies to exit the fossil fuels business: managed decline, liquidation or reinvention.
Metals for energy
About 75% of Glencore's business revolves around "essential" energy transition materials, including copper, nickel cobalt and zinc, and around 25% around fossil fuels, primarily coal, he said.
At Glencore "we're going to oversee managed decline.... We're not going to sell our coal assets but will reinvest cash coming out of the coal business to grow the base metals business to meet what we believe will be very significant new demand in those metals over the next 10 or 25 years as the world seeks to electrify," Hayward said.
"Companies backed by western democratic capital will be the most proactive and aggressive in this endeavor (pulling out of fossil fuels)," he said, citing some of the efforts taken by the European super-majors to "reinvent" themselves into integrated energy companies. "State-backed fossil fuel companies will certainly not evolve at the same pace as those backed by western democratic institution capital," Hayward said.
Glencore is one of the world's largest producers and exporters of seaborne traded thermal and coking coal, with 26 mines in 21 mining complexes across Australia, Colombia and South Africa. It produced a total of 139.5 million mt of coal in 2019, according to information on the company's website.