Glencore is gearing up to introduce a new coal giant into the New York market, which, based on recent performance, is poised to generate larger profits compared to the combined earnings of the top 10 US-listed coal miners.

The company, recognized as the world's leading thermal coal shipper, revealed the initial step of this initiative by acquiring control of Teck Resources' significant steelmaking coal business. Glencore's plan involves merging these mines with its own power-station coal assets, eventually spinning off a new entity to its shareholders within two years of finalizing the acquisition.

The amalgamated coal-focused business will surpass any seen by US or European investors in scale. Glencore achieved nearly $18 billion in profits from coal mining last year, mostly during an exceptional period of soaring prices following Russia's invasion of Ukraine. Teck's coal mines yielded around $5 billion. By contrast, the top 10 largest listed coal miners in the US collectively earned less than $8.5 billion in profits during the same period.

The forthcoming company will produce approximately 100 million tons of thermal coal annually, equivalent to approximately 10% of the global seaborne trade in that fuel. Additionally, it will yield about 34 million tons of coking coal. Such extensive production scales are typically associated with Indian and Chinese producers focused on domestic supply for power stations and steel mills rather than global market trading.

Tom Price, head of commodities strategy at Liberum Capital, highlighted the significance of Glencore's new coal venture in comparison to the mining giants of China, emphasizing its unmatched stature in Western markets.

The decision to launch in New York spotlights a growing divide between US and European investors regarding fossil fuel investments. While many European institutions are distancing themselves from fossil fuels, Glencore is banking on American investors' continued interest in the coal industry.

Lucas Pipes, an analyst at B. Riley Securities, remarked on the prevalent appetite for coal among US investors, which appears stronger than in recent years, contrasting it with European sentiments shifting away from coal investment.

However, Glencore's coal investment strategy faces a test over the next few years. The company aims to execute the move within two years after finalizing the deal, projecting its coal business to operate its mines until depletion by 2050. Despite the current US market favourability towards coal, attitudes and sentiments regarding the ownership and management of mines may change.

RBC Capital Markets previously estimated the combined value of the coal units at around $32.5 billion, projected to diminish to roughly $25 billion as prices normalize next year. In comparison, the US's current coal mining companies are considerably smaller in market capitalization. Alpha Metallurgical Resources, the largest listed coal company, holds a market cap of just $3.3 billion, while other prominent coal entities like Peabody Energy and Arch Resources are valued at around or below $3 billion.

Pipes suggested that a significant coal enterprise like Glencore's proposed venture could attract fund managers who have overlooked the relatively small coal sector due to its size.

He noted investors' hesitation in investing time to research a sector with limited market capitalization. Glencore's proposed entity, being significantly larger, might capture more attention and interest.