Glencore’s Xstrata Plan Won’t Hurt China Coal Market, Group Says

Chinese thermal coal producers are unlikely to oppose Glencore International Plc’s plan to combine with Xstrata Plc because the nation’s supply of the fuel is diverse, said the China Coal Transport and Distribution Association.

“I don’t think there will be much impact on the domestic coal market,” David Fang, a Beijing-based director with the association, said by phone. Glencore proposed a merger with Xstrata, the world’s biggest thermal coal exporter, the companies said yesterday.

Rising commodity demand from developing nations and the deteriorating quality of mineral reserves is spurring producers to combine and boost efficiency. Chinese coal customers are buying more coal from Indonesia and Mongolia after floods cut supply from Australia, where Xstrata has mines.

“China’s coal imports are still increasing, but imports from Australia are on a downward trend,” Fang said.

Chinese steel mills opposed BHP Billiton Ltd.’s failed takeover offer for Rio Tinto Group in 2007 arguing the combined company would have had too much control of the world’s iron ore market.