Glencore’s trading arm boosted by soaring commodity prices

Glencore’s trading arm boosted by soaring commodity prices

Glencore’s trading arm had a strong start to the year, boosted by rising prices for its crucial commodities as the global economic outlook improved.

The Switzerland-based company, which is also a big miner, said full-year earnings from its marketing unit would be at the upper end of its $2.2bn-$3.2bn guidance range.

Commodities from copper to coal have soared on the back of robust demand from China and elsewhere as the global economy emerges from the coronavirus pandemic. 

Copper, which is used in everything from household appliances to electric vehicles, came close to trading at more than $10,000-a-tonne on Wednesday, continuing a strong run from its Covid-19 lows in March 2020.

The metal was less than $200 away from passing its previous record, set in 2011 during a commodity boom.

In a quarterly production report, Glencore said copper prices had averaged $8,501 in the three months to March, up 51 per cent on the same period last year, while zinc was up 29 per cent, nickel 38 per cent and thermal coal 27 per cent. 

Tyler Broda, analyst at RBC, said the tailwinds supporting Glencore’s trading arm would continue for some time to come due to lingering supply disruptions in key commodity-producing countries such as Chile.

Glencore’s trading arm helps to smooth out the more volatile earnings from its mining assets. It is closely followed by investors because of the large amounts of cash it can generate. It also underpins Glencore’s dividend policy.

The unit achieved one of its best performances on record last year, reporting earnings before interest and tax of $3.3bn as its traders cashed in on the turmoil created by coronavirus in oil and metal markets.

In Wednesday’s update, Glencore said production from its mining assets in the first quarter of 2021 had been in line with expectations.

Glencore’s long-serving chief executive Ivan Glasenberg is set to retire in June. He will be replaced by Gary Nagle, the head of its coal assets. 

A proposed pay package for Nagle has come under fire from proxy groups and some investors. However, the company’s chair Tony Hayward has said he expects significant support for the package at its annual meeting in Switzerland later today.

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