Fossil fuels will continue to be needed as a bridging solution for the energy transition until renewable energy sources can be connected to the grid while the world's decarbonization efforts accelerate the need for power, Glencore CEO Gary Nagle said Feb. 21.
On an earnings call for the Switzerland-headquartered global miner and trading house Feb. 21, Nagle said that meeting the energy demand for decarbonization will take time.
"It's going to be difficult, funding is needed, capital is needed, materials are needed," Nagle said. "And in that time, we're still going to need the power. It's still going to come from hydrocarbons. It's still going to come from fossil fees."
The shutdown of coal mines, Glencore plans to shut down seven mines by 2035, is also contributing to the continued need for fossil fuels.
Global electricity demand is projected to increase a further 55% by 2035 to drive the energy transition, according to the International Energy Agency.
LNG supply is also going to be a a major key player said Glencore as the company expects China to increase imports of LNG to meet growing energy demand.
"It's no secret, the world knows there's a significant amount of LNG coming to the market from 2026 onwards," he said. "You've got Qataris bringing on their new production, more production coming out of the US, a lot will go into China and displace domestic production," he said.
While China will try to balance LNG and coal prices and replacing coal with LNG, Nagle said that demand for high-quality coal will also mean that Indonesian coal could be displaced as Indonesian coal usually has lower quality and compete with domestic Chinese production.
"The Chinese will play the economics and the way they set their price for domestic coal because they don't want prices too high for power and they don't want coal prices too low," he said, adding that there is potential downside risk for coal prices.
China's increasing solar and wind installations and electric vehicle industry are major supply opportunities for copper, nickel, cobalt and aluminum, according to Glencore.
No substitution for coking coal - yet
In terms of coking coal demand, Nagle said that high-quality coking coal will be strong during the energy transition and that -- despite the move to electric arc furnaces particularly by European steelmakers -- it will not be substituted in short-term as 90% of the world's blast furnaces are less than 15 years old.
Platts, part of S&P Global Commodity Insights, assessed Premium Low Vol Hard Coking Coal down 25 cents/mt on the day at $313.75/mt FOB Australia Feb. 21. Australian HCC dropped $15.25/mt on-month.
"We don't see demand erosion or demand destruction in material shape or form in the short, medium or longer term to be quite honest," Nagle said, adding that prices continue to be "healthy".
Overall, lower prices for battery metals weighed on Glencore's profits in 2023, particularly cobalt prices pricing and hydroxide payabilities on African copper assets as well as weaker nickel and zinc prices, resulting in lower copper, cobalt and nickel production.
Platts assessed cobalt hydroxide at $7/lb basis CIF China on Feb. 21, stable on-day and stable on-month.
For 2024, Glencore is expecting continued weak cobalt prices and production reduction but that a new "pro-business" approach by the new Argentinian government could inlock more potential as a major mining jurisdiction and that Glencore will be visiting the country in the next few weeks.
"They're looking for investment," said Nagle. "They want to give certainty to investors. They want to see investors come and spend their money in the country and be able to take the money out, ultimately, create jobs, create opportunities and do well."
Glencore has currently two large copper projects in the country, the copper, gold and iron ore Mara mine and the copper and molybdenum mine El Pachon.