Glencore soars to record profits on back of coal prices soaring

Glencore achieved record profitability final 12 months as provide chain snags and the Ukraine conflict’s escalation contributed to surging commodity prices.

The Swiss-based mining large’s underlying money earnings climbed by 60 per cent to $34.1billion, whereas web earnings greater than tripled from practically $5billion the earlier 12 months to $17.3billion.

Its power merchandise division offered the majority of progress as coal prices skyrocketed to record heights amid manufacturing shortages brought on by excessive climate occasions, significantly in Australia, and a short lived export ban in Indonesia.

Prices acquired an extra enhance from growing demand in India and Europe, the place soaring gasoline prices brought on by Russia’s full-scale invasion of Ukraine in February have made thermal coal appear comparatively cheaper.

Along with important volatility within the oil markets, which stored Brent Crude prices above $100 for a lot of 2022, Glencore was ready to nearly eradicate its web debt as complete income jumped by greater than 1 / 4 to $256billion.

Glencore has introduced dividends of $5.6billion for buyers in addition to $1.5billion in share buybacks.

Glencore expects to submit one other robust end in 2023, despite the fact that rate of interest hikes and elevated inflation ranges have created a more difficult financial outlook.

Its chief govt Gary Nagle stated the mix of China loosening Covid-19 restrictions, elevated focus on power safety and the necessity to minimize carbon emissions ‘imply that demand for a lot of of our commodities is probably going to stay wholesome’.

The FTSE 100 firm is one of the world’s largest producers of copper, cobalt, nickel and aluminium, all main parts crucial to the planet’s shift from fossil fuels to renewable and low-carbon sources.

Copper and nickel, along with the by-product cobalt, are all widespread components in rechargeable batteries, electrical automobiles, photo voltaic panels and wind generators.

However, Glencore plans to additionally proceed producing coal till the center of this century, even whereas different mining companies akin to Rio Tinto and Anglo American have offered or demerged their coal property.

This coverage has acquired important backlash from many Glencore buyers, with many supporting a latest decision calling on the agency to clarify how the plan aligns with its help of the 2015 Paris Agreement.

At the group’s most up-to-date AGM, virtually 1 / 4 of shareholders voted in opposition to the corporate’s local weather technique, which incorporates targets to halve emissions by 2035 and attain net-zero by 2050.

In response, Glencore introduced it could introduce an up to date local weather plan in March and has introduced ahead the closure of a quantity of coal mines. 

Matt Britzman, an fairness analyst at Hargreaves Lansdown, stated the agency’s excessive reliance on coal, whereas worthwhile, ‘might not win the group any favours with extra ESG aware buyers’.

He added: ‘Glencore’s argument is {that a} sluggish wind-down of coal is essentially the most accountable manner to present an important power supply while economies wean themselves off the power supply.

‘Whether you agree or not from an ethical standpoint, it is possible to be a selection that continues to plump up profits over the medium time period.’ 

Glencore shares have been down 0.7 per cent to 512.1p on Tuesday morning. They have grown by roughly 92 per cent up to now two years.