The world according to Glencore

2014-09-07 15:00

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‘For the right price, we will buy or sell ­anything,” Ivan Glasenberg, CEO of the global commodities giant Glencore, told journalists at a media briefing in Johannesburg this week.

He was fielding a barrage of questions about hypothetical and rumoured deals Glencore might make to further entrench its remarkable role in global trade.

Would it consider buying Anglo American? No. “We don’t trade ­diamonds,” he said, referring to Anglo’s stake in De Beers.

“We only look at stuff we trade.”

Glencore also doesn’t trade platinum, which is why it will eventually sell the 25% share in Lonmin it inherited when it merged with Xstrata last year.

“Platinum is not core. We will sell one day, but there is no rush on Lonmin. We’ll wait and see – it’s not a major asset,” said Glasenberg.

Likewise, Glencore has “no interest” in shale gas, should hydraulic fracturing ever get allowed in the Karoo. “Shale doesn’t move around the world.”

Asked if Glencore would consider buying the “Spinco” that BHP Billiton is splitting off, including its South African coal mines, Glasenberg said they are nice assets, but not actually for sale yet.

“We won’t grow for growth’s sake,” he said. Instead, Glencore tends to return all unneeded cash to shareholders.

According to Gary Nagle, CEO of Glencore’s alloys division, the company might get involved in private power generation.

“We’re looked at investing in private power, but we’re not in the business of operation power stations.” Glencore would, however, be a “good partner” for a company that is looking to operate private power stations, he said.

Glencore in fact has a partner in South Africa that is looking at doing just that, he said.

Being a major supplier to Eskom, Glencore’s interest probably relates to coal supply.

The Swiss-based company emerged from decades of secrecy to list on the London Stock Exchange in 2011. It raised $7.9?billion selling new shares then, but has paid out more than that in cash to shareholders since.

Glencore might be a public company, but it is hardly transparent.

The original trading division, which still accounts for half of the R863?billion company’s profits, is basically invisible.

After buying Xstrata last year, mines all over the world make up the rest.

Glencore’s dominant position in global commodity trading is only vaguely understood. The only real figures come from its initial listing documents, where it claimed to control anything between 3% and 60% of the ­“addressable market” for different commodities.

This measures the volumes that are traded globally ­opposed to those used by integrated mining companies – or not tradable.

For zinc and copper, Glencore had 60% and 50% of the world market. For thermal coal, it was 28%. It also claimed to trade 9% of global tradable grains.

The most pointed recent criticism of its trading business in South Africa’s neighbourhood came from Namibia, where Glencore, through subsidiaries, scored a deal to import 50% of all Namibia’s fuel from 2009 to this year.

Soon enough, the contract was costing Namibia millions – allegedly due the costs of the Glencore imports.

By 2010, the Namibian government cancelled that deal and ended up defending the decision in the Supreme Court of Appeal up to 2012.

Asked what Glencore trades across South Africa’s borders, other than the produce of its mines here, head of coal, Clinton Ephron said: “We do bring in oil, but I don’t know how much.”

Glasenberg said: “South Africa doesn’t need much commodities,” adding that Glencore doesn’t break down or publish details about its third party marketing.

“We buy from everyone,” he said, mentioning chrome and manganese ore.

In South Africa, Glencore sits in the middle of the two major debates around mineral beneficiation – thermal coal and chrome ore exports. After buying Xstrata, the group now owns the major South African ferrochrome producer, the Glencore-Merafe venture (formerly Xstrata-Merafe).

Merafe had spearheaded a campaign to have the government impose taxes on the export of chrome ore, instead of beneficiated ferrochrome, in 2012. Now it has called that campaign off.

Anecdotally, Glencore is said to almost completely control the export of both commodities out of South Africa, meaning it is technically fighting both sides of the battle.

Asked about the conflict between trading ore and protecting the downstream sector, Nagle said the export tax that Merafe had lobbied for to curb chrome ore exports is not really an issue any more.

“The idea of an export tax can’t be pushed right now. There’s no power to smelt it,” he said.

Glencore’s other major mining asset in South Africa is coal. The government has indicated that it wants to declare it a strategic mineral to help supply Eskom at lower cost – by ­restricting exports.

According to Glasenberg, “we will invest in anything where there are decent returns. Whether it is a strategic mineral or not, we will come if the return works.

“Hopefully, South Africa will be smart, and the rest of ­Africa too,” he said.

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