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The fact that discussions are taking place between two of the world’s biggest mining companies has set the industry alight. While there is apparently still some way to go before any deal is struck, we can already see that this would have a major impact on London.
The full story
This possible deal was confirmed by Rio Tinto recently, with a statement confirming that it was engaged in discussions with Glencore with a view to combining “some or all of their businesses”. The wide nature of this statement has led to intense speculation about what it could mean for the global markets, particularly copper.
These same companies were locked in talks a year ago, but it ended with no agreement being reached. This time, it seems that the most likely result is that Glencore’s shares will be acquired by Rio Tinto, which would be through a Court-sanctioned scheme of arrangement, according to the statement.
This mega-deal would be even more interesting if we take into account the current importance of copper mining, which is classed by some sources as the world’s most vital metal right now. Copper is now increasingly important due to the fact that it’s needed for the construction of data centres, which are springing up across the planet to handle the growing use of artificial intelligence. It’s also needed for the fast-growing renewable energy industry.
What it means for London
London is a vital market for many commodities, with the trading carried out here helping to define prices across the planet. Gold, coffee and cocoa are among the products whose prices are largely set here, but what about copper?
The London Metal Exchange (LME) is the biggest market for the trading of industrial metals. It has the last remaining open-outcry trading floor in Europe, while all others have moved to a completely electronic way of trading. Global benchmark prices are set here, including for copper futures.
Commodities are increasingly traded online, with a CFD broker platform showing different products and how they can be used. Copper is listed alongside the likes of natural gas, crude oil and wheat. A CFD (contract for difference) means that the trader doesn’t buy the asset but looks to gain from any price changes. However, the price is still set at physical exchange, with London one of the key locations for this.
Any combination of Rio Tinto and Glencore would probably be the London Stock Exchange’s biggest company and would ensure that it has even more emphasis on mining. This would lead to more liquidity entering the market, as ETFS and passive funds would have to buy shares in the new company. This would help confirm London’s position as a global leader in mining and precious metals trading.
If this merger goes ahead in one way or another, it will reinforce London’s position as a leading centre for mining and copper trading and boost its stock exchange. Traders and financial analysts will be keeping a close eye out for any new stories that let us see more about how this deal could be made.
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