Why mega-merger mania is taking the lead in the mining industry.

The mining sector looks poised for a bumper trading year following market speculation about a possible tie-up between industry giants Rio Tinto and Glencore.

It comes after the Bloomberg news reported British-Australian multinational Rio Tinto and Switzerland-based Glencore were in preliminary merger talks on Thursday, although it was not said whether the talks were still going live.

Separately, Reuters reported Glencore approached Rio Tinto late last year about the possibility of combining their businesses, a source familiar with the matter said on Friday. The news agency reported that the brief talks are no longer considered active.

Rio Tinto and Glencore both declined to comment when contacted by CNBC.

The merger between Rio Tinto, the world’s second largest miner, and Glencore, one of the world’s largest coal companies, would be the biggest ever in the mining industry.

Combined, the two firms will have a market value of nearly $150 billion, leapfrogging the longtime industry leader. BHPIt is worth about 127 billion dollars.

Analysts were widely skeptical about the merits of the Rio Tinto-Glencore merger, which would leave limited synergies, Rio Tinto’s complex Double structure And strategic differences over coal and corporate culture are challenges to concluding a deal.

“I think everybody’s a little bit surprised,” Maxime Koge, equity analyst at Odo BHF, told CNBC by phone.

“Actually, stackable assets are limited. It’s only copper when there’s some synergy and opportunity to add assets to create a larger group,” Koge said.

Global mining giants are considering the benefits of mega-mergers to boost their position in the energy transition, especially with demand for metals such as copper in the coming years.

Due to the development of electric vehicles, wind turbines, solar panels and energy storage systems, among other applications, copper is expected to face a shortage of highly mobile metal.

Rio Tinto’s long-delayed and new projects are now “very difficult” for big mining companies to bring online, said Odo BHF’s Koge. Controversial As an example of solution copper mining in the US.

“It’s a very promising copper project, maybe one of the biggest in the world, but it’s full of problems and somehow getting another company is a way to really accelerate the expansion into copper,” he said.

“For me, the deal is not that attractive,” he added. “It goes against what all these groups have tried to do in the past.”

Last year, BHP made a $49 billion bid for smaller rival Anglo American.

Some analysts, including those at JPMorgan, expect another unsolicited offer for Anglo American to materialize in 2025.

Before joining Anglo American, BHP It is completed The acquisition of OZ Minerals in 2023, strengthening the copper and nickel portfolio.

Analysts led by Ben Davies at RBC Capital Markets said it was unclear whether talks between Rio Tinto and Glencore would result in a simple merger or the break-up of parts of each company.

Regardless, he said the M&A parliamentary games, which have been raised following merger talks between BHP and Anglo American, will undoubtedly “commence in earnest”.

“Glencore, once Rio Tinto’s key shareholder Chinalco, approached for a merger in July 2014 but still comes as a surprise,” RBC Capital Markets analysts said in a research note published on Thursday.

BHP’s move to acquire Anglo American is likely to trigger talks between Rio Tinto and Glencore, analysts said, with the former looking to gain more copper exposure and the latter seeking an exit strategy for larger shareholders.

“We don’t expect a direct merger to happen as we believe Rio’s shareholders will see it as supporting Glencore, but (it could) be possible to have a deal structure that makes both shareholders and management happy,” he added.