Glencore Head Office

Copper Is Catalyst for Glencore Rescue Plan

Glencore PLC Chief Executive Ivan Glasenberg’s rescue plan for his company could hinge on the fortunes of a single metal: copper.

The company’s decision to close two unprofitable African copper mines would take 400,000 tons of copper production out of the market over the next 18 months, and helped send prices for the industrial metal up 5% in the U.S. and nearly 4% in London on Tuesday. Copper’s gain was also attributed to new data out of China showing stronger-than-expected demand from the world’s largest consumer of the metal.

Copper is today by far the most important commodity to Glencore, which produced 730,900 tons of it in the first half of 2015. Declining copper prices—which dipped below$5,000 a ton in August for the first time since the financial crisis, wiping more than 50% off its 2011 peak—slammed Glencore’s earnings this year, helping it swing to a loss in the first half of the year.

Copper’s struggles were part of the reason Mr. Glasenberg ordered the African mines shut and unveiled other actions Monday to cut the company’s debt to about $20 billion, down by $10 billion, over the next 16 months. He scrapped Glencore’s dividend, announced a stock issue and called for a new round of cost-cutting and asset sales.

Mr. Glasenberg said his plans should protect Glencore against a “doomsday” scenario in commodity prices, in which Chinese demand continues to fall and prices plunge even farther. Aside from copper, Glencore is the world’s biggest producer of thermal coal, which is used in power stations; and it is also a major player in oil, zinc, and other commodities.

 

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