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Glencore reports first annual loss for four years

By Lawrence Gash

Anglo-Swiss mining giant writes down $2.8bn in impairments

Glencore (GLEN) has reported its first annual loss in four years. A decline in demand for coal, the expiry of its licenses in its Chad oil operations and the slowdown in the wider global economy have dealt a blow to the Anglo-Swiss mining giant. The firm has written down $2.8bn (£2.1bn, €2.6bn) in impairments as a result.

Chief Executive Ivan Glasenberg stated: The amount of coal being consumed in the Atlantic is decreasing, right now, seaborne coal demand is about 70 million tonnes and I don’t see a big recovery and it will continue to decrease.”

Overall Glencore reported a net 2019 loss of $404m (£309m, €373m), compared to 2018’s profit of $3.41bn. Following the announcement by noontime trading, the company’s share price had fallen by 4.00 per cent to stand at 227.18 pence.

Glasenberg was candid about the future of some of Glencore’s investments, admitting that: “reserves are depleting in Colombia, by 2035 we won’t have any production in Colombia.”

The firm has also been beset by a number of corruption probes into its operations in Venezuela, Nigeria and the Democratic Republic of Congo. While Glencore is cooperating with authorities, these investigations have caused the company’s legal costs to almost double within one year.

However, the situation is by no means uniformly bleak. While the company’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell 26 per cent, they beat analyst predictions of $11.25bn, to total $11.6bn.

While the coal market may witness decreasing demand, Glencore has already begun to pivot to provide the materials required in so-called ‘green’ technologies. The upswing in cobalt prices at the end of 2019 will have been welcomed by the company, which has developed a substantial mine at Katanga in the DRC.

The metal is essential in the production of batteries for electric vehicles, which, thanks to government subsidies and changing public opinion, are becoming increasingly popular. Only last week the miner signed a five-year deal to provide 21,000 tonnes of cobalt to the South Korean battery maker Samsung SDI.

As one of world’s largest natural resources firms with a market capitalisation of £30bn, Glencore’s long-term success will likely depend on its ability to diversify speedily to meet changing energy needs.

FURTHER READING: Glencore signs five-year deal to provide cobalt to Samsung SDI

FURTHER READING: World Trade Organisation predicts weak trade growth in early 2020

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