Weak coal prices and a slump in copper production took their toll on diversified miner Glencore in the first half of its financial year.
The group reported a 14% drop in adjusted earnings before interest, tax, depreciation and amortisation (ebitda) to $5.43bn, while its balance sheet showed it was $3.5bn deeper in debt than at end-December.
The pressure came as the group’s copper business navigated “various temporary but largely expected operational factors,” the company said.
Planned mine sequencing, lower grades, water constraints and cobalt stockpiling all weighed on output from the group’s Chilean Collahuasi and Antamina mines, Peruvian Antapaccay mine and its Kamoto Copper Company joint venture in Democratic Republic of Congo.
Added to this were weaker coal prices, which have slumped more than 21% in the past 12 months as trade wars, policy uncertainty and investment in renewables weigh on demand.
As geopolitical tension clouds energy markets, coal’s uncertain price outlook has been a constant feature of Glencore's latest results.
In April, Glencore announced a 5-million tonne to 10-million tonne production cut at its Colombian Cerrejon mine as geopolitical tension, policy changes and trade wars continued to disrupt coal markets.
With copper production weighted to the second half, Glencore CEO Gary Nagle is hopeful that the group will see a rebound in the last six months of the year.
The group expects its ordinary course net debt to “meaningfully reduce” by year-end, and full-year production guidance was maintained across all its commodities.
Some recent encouragement came from an operational review conducted in the first half, which identified about $1bn of cost savings opportunities, which are expected to be fully delivered by the end of 2026.
Last month, the company received a $900m cash injection from its merger of Viterra and Bunge Global. In the wake of the deal, Glencore investors welcomed a new $1bn share buyback scheme aimed at returning value to shareholders.
“While there is much uncertainty around the impacts of geopolitics and trade in the shorter-term, we remain of the view that, in certain commodities, the scale and pace of required resource development will struggle to meet the demand projections for such materials into the future,” said Nagle.
A report by the UN Conference on Trade and Development suggests that about 80 new copper mines and $250bn in investments are needed to meet global copper demand by 2030.
Another report by the International Energy Agency forecasts that global coal production will continue to grow this year as demand for the fossil fuel remains at record highs, shrugging off geopolitical noise and climate mandates.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.