A SHARE price collapse by one of the Hunter’s biggest coal miners is ‘‘a train wreck’’ fuelled by high debt and low commodity prices that has exposed the fragile underpinnings of the region’s reliance on coal.
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Glencore’s 30 per cent overnight share slump this week was likened by analysts to the sudden collapse of Lehman Brothers in 2008 that triggered a financial sector meltdown, in terms of its impact on the global coal market.
The company did not respond to questions about the future of its seven Hunter mines including Mangoola, Bulga Coal, Mount Owen, Liddell and Ravensworth, with the most serious concerns about its Ulan thermal coal mine.
Glencore has already announced it is accelerating the closure of its West Wallsend mine because of tough market conditions.
The Glencore share price collapsed overnight on Monday after British investment bank Investec warned that Glencore and Anglo American shares could become almost worthless if coal prices remained at current levels.
BHP Billiton and Rio Tinto shares also hit their lowest levels since the global financial crisis wiped billions of dollars off commodity shares, as markets reflected increasing concerns about whether the thermal coal price slump is short term, or the start of long term structural decline.
Glencore assets are now up for grabs as the company tries to reduce nearly $30 billion in debt.
Construction Forestry Mining and Energy Union Hunter district president Peter Jordan expressed concern for Glencore’s Hunter workforce because ‘‘when it gets tough, the first people that take it are the workers’’.
‘‘We’re always concerned about job losses in these situations,’’ Mr Jordan said.
The company’s recent investment in the underground coal mine known as Glennies Creek was puzzling under the circumstances, Mr Jordan said.
Hunter MP Joel Fitzgibbon said he was concerned about Glencore jobs based on the reasons behind the share slump.
‘‘While the price of coal is not something we can control, it’s the wrong time for the Greens and other elected representatives to be proposing new threats such as environmental taxes and the withholding of investment,’’ Mr Fitzgibbon said.
Energy analyst and former Citigroup head of equity research, Tim Buckley, said Glencore’s dramatic collapse was further evidence of the need for the Hunter region to transition away from reliance on coal.
‘‘The core problem facing many companies like Glencore is that they don’t believe what’s happening could be structural, and long term. They think it’s cyclical,’’ Mr Buckley said.
‘‘Put financial leverage (high debt) on top of structural decline and you get a train wreck.’’
