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Market reaction to Rio Tinto’s purchase talks with Glencore
The companies have confirmed that they are in the early stages of talks with Rio Tinto to purchase Glencore. This could result in the creation of the largest mining company in the world, valued at nearly $207 billion. Investor and analyst reactions to the latest news. WILSON ASSET MANAGEMENT PORTFOLIO MANAGER JOHN AYOUB, WHOSE FIRM HAS SHARES IN RIO TINTO: "We are eagerly awaiting more details and comments from both companies, but right now, in our opinion, no premium can be paid at all. Rio is undoubtedly the better company and we should be compensated by using synergies, not just paying for them. "Coal must be divested in order to gain the support of Australian shareholders." Rio's story has been relatively straightforward, with iron ore and copper being the main players. Aluminium, lithium, and aluminium were added later. Addition of a few other players dilutes the narrative and you'd need to have significant synergies in order to counteract that dilution. ARGO INVESTMENTS SENIOR PORTFOLIO MANAGER ANDY FORSTER WHOSE FIRM HAS SHARES OF RIO TINTO. It makes sense, if the terms are fair for both. The culture of both companies is the biggest question. Glencore has a strong trading background and is very results-oriented. Some of these aspects could be beneficial to Rio. "I hope Rio remains disciplined, but it is sensible to consider deals that can benefit both parties." ALLAN GRAY'S TIM HILLIER HOLDS SHARES IN RIO TINTO. There is a chance that Rio could overpay. The price is important, but if the transaction involves a large premium then there's a chance that shareholders could lose some value. Rio has a pipeline of high-growth internal projects. It is not clear why the company needs to look outside for projects. RBC ANALYST KANAAN PEKER "Consensus says they'll get rid of coal. Rio's shareholders in Europe, especially, find it impossible to accept a return of coal. "I don't believe they should do anything because I think BHP is a better company in terms of growth than Rio/Glencore merged together." JEFFERIES METAL AND MINING ANATOMISTS: The structure of a Rio Glencore merger would be complicated. The companies' iron ore and coking coal businesses could be merged into an Australian listed entity. This entity would likely trade with a high valuation if it distributed its strong cash flows through the cycle to Aussie investors via franked?dividends. Base metals business could be listed separately and trade at a higher price than most other miners because of the mix of commodities, asset quality and company growth. This scenario would have a number of tax implications, and be a difficult one to structure. "Another possible scenario is that Glencore separates coal and sells itself in an all-shares deal to Rio at a significant premium (we wouldn't expect Glencore to be taken out of a no-premium merger). This would dilute Chinalco’s stake in Rio, and could allow Rio to do a large-scale share buyback in the future (similar to BHP's proposal when it attempted to acquire Rio back in 2007/08). This full merger scenario could have substantial synergies in marketing." Reporting by Scott Murdoch and Melanie Burton, both in Sydney; editing by Jamie Freed
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Oil prices rise as fears about disruptions of supply in Venezuela and Iran increase
Oil prices rose again on Friday. They are now set to make their third weekly increase, due to uncertainty over the future supply from Venezuela, and because of increased concerns about Iranian production. Brent futures gained 44 cents or 0.71% to $62.43 a barrel at 0203 GMT. U.S. West Texas Intermediate crude (WTI), however, rose 39 cents or 0.68% to $58.15. Brent will rise 2.7% this week while WTI is up 1.4%. The price of oil has increased since the U.S. Donald Trump's last-week seizure by Venezuelan President Nicolas Maduro and his claim that the U.S. would control the South American country's oil industry have increased supply concerns. Concerns about supply have been heightened by civil unrest in Iran, a major Middle Eastern oil producer. Also, the Russia-Ukraine conflict and its potential to spread to Russian oil exports has raised concerns. Tina Teng is a market strategist with Moomoo ANZ. She said that the price increase was primarily due Trump's claim of control over Venezuela's oil. This could have led to a 'price hike' from discounted sales. Sources familiar with the situation say that oil major Chevron, trading houses Vitol, Trafigura and other firms are competing to get deals from the U.S. government to export Venezuelan crude oil. Trump demanded Venezuela grant the U.S. access to all of its oil sectors just a few days after Maduro was captured on Saturday. U.S. officials claim Washington will continue to control Venezuela's oil revenues and sales. Two sources claim that the companies are disputing the initial deals for the marketing of up to 50,000,000 barrels of oil that the state-run PDVSA accumulated as inventories during a severe embargo which has resulted in the seizure of four tankers. The market will pay attention to the outcome of the Venezuelan oil that is in storage in the next few days. Teng said that if sales are not limited, oversupply could continue to be a problem. Haitong Futures?reported in a Friday report that oil prices spiked after several days of low levels, partially correcting an earlier disregard for geopolitical risk. Internet monitoring group NetBlocks reported a nationwide internet blackout in Iran on Thursday, as protests against economic hardships continued throughout the country. Masoud Pezeshkian, Iran's president, warned against overpricing and hoarding of goods. This was reported by state media on Thursday as Tehran rolled out high-stakes reforms to subsidy policies during nationwide protests. Haitong Futures stated that global inventories continue to rise, but oversupply is the main factor that could limit the gains. Haitong Futures said that unless risks in the region of Iran escalate, it is unlikely to be a sustained recovery. Sam Li reported from Beijing, and Jeslyn Lerh edited the report in Singapore.
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BlueScope’s top investor rejects $9 Billion M&A Offer for Firm, Calls it Undervalued
AustralianSuper, BlueScope Steel's largest shareholder, said that a $9 billion takeover bid from SGH & Steel Dynamics in the U.S. undervalued the company and it supported its decision to reject this offer. After announcing its increase from 12.5% on Thursday, the pension fund now holds 13.52% in BlueScope. BlueScope, which rejected the SGH Steel Dynamics offer of?A$30 a share on Wednesday, said that it was "significantly undervalued" and accused the acquirers for trying to purchase BlueScope 'on the cheap. AustralianSuper's spokesperson stated that "we?support the BlueScope Board's decision to?reject?the offer" and to'remain focused' on executing the strategy of the company without distraction." The current BlueScope offer does not reflect the value we currently believe the business to be worth. According to our current valuation, a transaction would be supported only if the price was substantially higher than A$30 per share. SGH refused to comment on AustralianSuper’s statement and BlueScope didn’t immediately respond when asked for a comment. Australian pension funds are playing a more active role in corporate acquisitions. AustralianSuper, for example, scuppered Brookfield's offer of $10.6 billion to buy Origin Energy. The largest pension fund in Australia said that the bid was undervalued at the time. (Reporting and editing by Scott Murdoch, Cynthia Osterman, and Muralikumar Aantharaman).
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BlueScope’s largest investor rejects $9 billion takeover bid
BlueScope Steel’s largest investor, AustralianSuper said on Friday that it supported the Australian company's decision to reject a $9 billion offer from U.S.-based Steel Dynamics and?SGH?. After announcing its increase in stake on Thursday, the pension fund now holds 13.52 % of BlueScope. BlueScope rejected the $A30 offer from?SGH & Steel Dynamics on Wednesday, saying that it was "very significantly undervalued". The company also accused the acquirers of trying to buy BlueScope 'on the cheap. AustralianSuper's spokesperson stated that "we support the BlueScope Board's decision to reject the offer and remain focused on executing the company's strategy, without distraction." The current BlueScope offer does not reflect the value we currently believe the business to be worth. According to our "current valuation", we would only approve a deal that was substantially higher than the price of A$30 for each share. BlueScope,?SGH and?AustralianSuper did not respond immediately to a comment request on?AustralianSuper?s statement. Australian pension funds are playing a more active role in corporate takeovers, with AustralianSuper rejecting Brookfield’s $10.6 billion offer for Origin Energy. The largest pension fund in Australia said that the bid was undervalued at the time. (Reporting and editing by Scott Murdoch, Cynthia Osterman).
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Two people are wounded by US border agents in Portland
Police in Portland, Oregon said that two U.S. federal agents had shot and injured two people. They were then taken to hospital. Portland police released a statement saying that two people were hospitalized following an incident involving federal agents. Bob Day, the police chief in Minneapolis said: "We are aware of the high level of emotion and tension that many people feel in the aftermath of the shooting in Minneapolis. However, I ask the community to be calm while we continue to investigate the incident." The police said that they did not take part in the shooting on Thursday. The FBI announced that it was investigating a shooting in which U.S. Customs and Border Protection (CBP) agents were involved. In the Minnesota shooting, an officer of U.S. Immigration and Customs Enforcement was involved. ICE is a separate agency of Homeland Security. Portland Police said that the condition of those who were shot is unknown. Officers responded and found two people with gunshot injuries. Officers applied tourniquets and called emergency medical personnel. "The patients were transported to hospital." Portland Police said in a press release. ABC News reported that Portland City Council president Elana Pirtle Guiney said, as far as she was aware, they were still alive. On social media, FBI Portland announced that it was investigating a shooting that occurred at around 2:15pm near the 10000 Block of Main St. Portland. The circumstances of the shootings in Portland are not yet known. The fatal shooting by an ICE agent of a 37-year old mother of three on Wednesday in Minneapolis drew widespread condemnation and protests from Minnesotans and other officials. Portland Mayor Keith Wilson stated in a statement that his city is now dealing with violence from federal agents. "We cannot sit back while constitutional protections are eroded and bloodshed increases." He asked ICE to halt its?operations' in the city until a thorough investigation could be conducted. Wilson stated that "federal militarization undermines community-based safety and runs against the values which define our region." Wilson said: "I will use all legal and legislative tools available to protect the civil and human rights of our residents."
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Reliance India would buy Venezuelan oil, if permitted
Reliance Industries, India's operator of the largest refinery complex in the world, announced?on Friday that it would buy Venezuelan oil, if allowed to be sold to non-U.S. customers. In an email response to queries, a Reliance Industries spokesperson said: "We are waiting for clarity on the access of Venezuelan oil by buyers outside the United States and will consider purchasing oil in a compliance manner." Industry sources say that state-run refiners Indian Oil Corp. and Hindustan Petroleum Corp. will also buy Venezuelan oil, if the sale of Venezuelan crude is allowed to companies outside the United States. Both companies did not respond immediately to requests for comment. RELIANCE STOPPED BUYING VENEZUELANOIL LAST YEAR Caracas reached an agreement with Washington this week for the export of up to $2 billion in Venezuelan crude oil, or 30-50 million barrels to the United States after U.S. forces captured President Nicolas Maduro, on January 3. Reliance stopped purchasing Venezuelan oil in March 2025, after President Donald Trump announced that a 25% tariff would be applied to nations who bought crude from the South American producer. Conglomerate received last Venezuelan oil shipment in May of last year. Reliance has two refinery facilities in the western Gujarat state with a combined crude oil capacity of 1.4 million barrels a day. This allows it to process heavier and cheaper crudes like Venezuela's Merey. Sumit Ritola is a lead research analyst at Kpler, specializing in refining and modeling. A COMFORTABLE ALTERNATIVE FOR 'RUSSIAN ENERGY' LSEG's trade flows reveal that India's HPCL Mittal Energy, Nayara Energy IOC and Mangalore Refinery & Petrochemicals imported Venezuelan crude oil in the past. Ritola stated that Venezuelan oil was a "politically acceptable diversification option" for India in comparison to Russian oil. India is under pressure from the West to reduce its Russian oil purchases following Moscow's invasion of Ukraine, as they are concerned that oil revenues may be used to fund Russia's war efforts. Last year, the United States doubled tariffs against Indian goods from 25% to 50% citing India's "heavy purchase of Russian crude". On Wednesday, a Republican Senator claimed that Trump has 'greenlit?legislation to sanction countries doing business in Russia. Reliance, however, has said that it will not be receiving Russian oil this January. India's Russian imports could be drastically reduced by the decision. Ritola stated, "We have already seen Reliance reduce its intake of Russian oil. This shows refiners can adapt to new risks or compliance issues." (Reporting and Editing by Louise Heavens, Bernadettebaum, and Nidhi verma)
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Marathon Petroleum, a US refiner, has announced that it will bid for Venezuelan crude.
Marathon wants to bid for Venezuelan crude oil, said the company on Thursday. The U.S. government is preparing to increase imports after the ouster of President Nicholas Maduro in January. The company declined to confirm if there would be an auction. Caracas, Washington and other Venezuelan oil producers reached an agreement this week for the export of up to $2 billion in Venezuelan crude to the United States. This is equivalent to 30 million to 50 million barrels. Citgo Petroleum, a Venezuelan-owned refiner, also wants to take part in any auctions of Venezuelan crude, the board decided Thursday, according two sources within the company. The company has ?not been allowed to import Venezuelan crude for years after it severed ties with ?its parent, Caracas-headquartered oil firm PDVSA, in 2019. Citgo didn't immediately respond to a comment request. The biggest beneficiaries of an easing in sanctions against Venezuela are expected to come from U.S. Gulf Coast refining companies, many of which are designed to process more of the Venezuelan oil than what the U.S. produces.
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Stocks mixed; yields rise before US jobs data
Treasury yields rose Thursday, ahead of the key U.S. Jobs Report on Friday. Defense company shares also gained as a result of U.S. president Donald Trump's plans to spend $1.5 trillion on a military budget. The?aerospace-and-defense index reached a record high. European defense shares also hit a new peak. Investors also watched developments in Venezuela, which led to a rise in oil prices. The U.S. military captured Venezuelan president Nicolas Maduro over the weekend. The White House announced on Tuesday that Trump is also discussing the possibility of acquiring Greenland. The number of Americans who filed new claims for unemployment benefits increased moderately in the last week. This suggests that layoffs will be relatively low by the year 2025. However, the demand for labor is still sluggish. The Federal Reserve is expected to cut rates at least twice this year. However, a divided Federal Reserve indicated that there would only be one rate cut in 2026. At its meeting in this month, the Fed is expected to maintain rates at their current level. The U.S. Employment report for December, which is due on Friday, will be crucial. The S&P 500 closed the day at a flat level. The S&P 500's technology sector was the worst performing, but energy was the best. The global stock index fell slightly. "There are lots of potholes around, but we're skipping over them so far," said Rick Meckler. Cherry Lane Investments is a family-owned investment firm in New Vernon, New Jersey. Investors remain positive at the bottom of the market. The Dow Jones Industrial Average rose by 270.03 or 0.55% to 49,266.11; the S&P 500 gained 0.53 or 0.01% to 6,921.46; and the Nasdaq Composite dropped by 104.26 or 0.44% to?23480.02. Nvidia shares fell 2.2%, Broadcom fell 3.2% and Microsoft dropped 1.1%. The MSCI index of global stocks fell by 2.22 points or 0.22% to 1,029.26. The pan-European STOXX 600 fell by 0.19%. After?two consecutive days of declines in oil prices, they settled at a high of two weeks. Brent futures gained $2.03 or 3.4% to settle at $61.99 a barrel. U.S. West Texas Intermediate crude (WTI), however, only gained $1.77 or 3.2% to settle at $57.76. As the dollar strengthened, and investors secured profits, copper and nickel prices dropped. DOLLAR UP YIELDS The yield on the benchmark 10-year notes?U.S. The yield on 10-year notes increased 4.5 basis points, to 4.183%. The yield curve between 2- and 10-year notes steepened by around 2 basis point to 69 basis points. Venezuela's defaulted bonds finally cooled down after their near 40% increase following the weekend's event fuelled investor hope for a "massively complicated debt restructuring". Investors are awaiting the Friday labor report. The dollar index (which measures the U.S. Dollar against six rival currencies) was up by 0.2% to 98.922 at its highest level since December 10.
Texas braces for more summer electrical power signals: Kemp
The Electric Reliability Council of Texas (ERCOT) has actually warned reserve margins will be squeezed next week as temperatures increase and it may require to advise generators to delay nonurgent upkeep.
ERCOT is the independent system operator for the majority of Texas, handling the circulation of power to more than 27 million consumers representing about 90% of state-wide load.
ERCOT has issued comparable cautions several times over the last month, after issuing numerous alerts calling on customers to lower their power intake last summer season to avoid the danger of rolling blackouts.
The state's summer power scarcities are mainly the result of fast population and financial development, which has actually left generators struggling to keep pace with the rapid increase in load.
The state's resident population increased to 30.5 million in 2023 from 22.0 million in 2003, a typical yearly increase of 1.6%.
The state economy grew at an average yearly rate of 3.4%. in between 2017 and 2023, compared to 2.2% for the nation as a. whole.
As an outcome, state electrical energy sales increased to 487. billion kilowatt-hours (kWh) in 2023 from 323 billion kWh in. 2003, a typical annual boost of 2.1%.
Texas power sales have actually grown more than 3 times quicker. than in the rest of the country, where they increased at an. typical rate of simply 0.6% per year between 2003 and 2023.
DEVELOPMENT AND SECLUSION
Like other fast-growing electrical power systems, such as those. in China and India, ERCOT has actually struggled with regular inequalities. between generation and load.
It is much harder to balance generation and load, while. maintaining an adequate reserve margin, in a system. characterised by quick development than one with flat or decreasing. demand.
Flat or decreasing load usually means there are a lot of. legacy generators no longer in regular service however that can be. contacted us to launch when reserve margins become tight. ERCOT does. not have that option.
The system's issues are intensified since it has couple of. links with power networks in the rest of the country that would. enable it to import power when there is a local shortfall.
Texas has made a political choice to restrict cross-border. affiliations with other states to avoid oversight of its. electrical energy system by the Federal Energy Regulatory Commission. ( FERC).
In contrast to other states, Texas has likewise up until recently. avoided the concept of paying power plants to maintain extra. capability, instead of for the systems of electrical energy actually. produced.
To decrease overall expenses, the state has run an. energy-only market rather than a capability market too.
Rather than paying for reserve capacity that will be idle. for much of the year, Texas has depended on high wholesale rates. to motivate minimal generation and force load reductions at. times when margins are low.
Chartbook: Texas electrical power usage
ERCOT's balancing issues are especially severe during the. summertime, when daytime loads peak far greater than in the. remainder of the year as a result of comprehensive air conditioning.
But reserve margins can also be depleted in the spring and. autumn shoulder seasons, when lots of gas-fired, coal-fired and. nuclear generators are taken offline for maintenance.
Heatwaves that get here earlier than usual in the spring, or. occur behind regular in the fall, stretch power materials. due to the fact that lots of generators have actually scheduled regular downtime.
To rebuild reserve margins, dependability managers can provide. ' no touch' orders to generators and transmission owners. advising them to hold off any but the most immediate. upkeep.
If that still proves insufficient to increase reserve margins. to a healthy level, grid supervisors can order flat-out 'optimum. generation' from readily available units.
Eventually, the grid can look for numerous forms of voluntary. demand reduction; concern notifies calling for customers to conserve. electricity; and in the last resort by force disconnect loads on. a rotating basis.
HANDLING HEATWAVES
The proliferation of crypto-mining operations and data. centres, connected with huge loads, appears to have. turbocharged growth in electrical power consumption in 2022 and 2023.
Nevertheless, since of population and economic development, Texas. electricity usage has actually set records most years just recently,. regardless of whether the summer season has been particularly hot or. not.
Heatwaves have actually nonetheless extended resources to the limitation,. and required the grid to undertake amazing steps to improve. short-term generation and decrease load.
In recent weeks, ERCOT has been counting on no-touch orders,. a few of them consequently cancelled, to maximise the generation. and transmission resources readily available in durations of warm weather condition.
Last summer, it relied greatly on emergency situation signals broadcast. to consumers requesting for electrical energy conservation when reserve. margins were particularly low.
The state experienced a total of 2,687 cooling degree days. between May and September 2023, the second-highest on record. after 2011.
August and September 2023 were much hotter than normal,. forcing the grid to issue numerous alerts to generators and. customers.
But the mix of higher wholesale costs and duplicated. appeals for preservation appear to have actually blunted load growth. effectively.
The variety of cooling degree days was up by 23% in between May. and September 2023 compared to the exact same period in 2021, while. electrical power sales were only 16% higher.
It is simple to criticise ERCOT's duplicated balancing. problems, but the system's issues are those of rapid. development, so they are great problems to have.
ERCOT's grid managers have been effective at balancing the. system, provided the historical absence of a capability market and. the political unwillingness to adjoin with neighbouring. grids.
Related column:
- Texas population growth drives tape electrical power. use( August 15, 2023)
John Kemp is a market expert. The views expressed. are his own. Follow his commentary on X https://twitter.com/JKempEnergy.
(source: Reuters)