Hong Kong - Glencore’s [JSE:GLN] suspension of two African mines will cut its copper output by nearly a fifth, a move that lifted prices in one of the world’s major metals markets that is not heavily oversupplied.
Glencore is reviewing copper production at its Mopani operation in Zambia and the Katanga facility in the Democratic Republic of Congo in the light of the “challenging environment for commodities”, it said in a statement.
Plunging prices are forcing miners to consider cutting production or delaying new projects to save money and mitigate oversupply.
The Switzerland-based commodity producer and trader is restructuring its operations and finances in a bid to cut around a third of its $30bn debt. Metal prices at six-year lows have pummelled mining company stocks and prior to its announcement, the company had lost more than half its market value this year.
Earlier on Monday the copper chief at rival miner and one-time Glencore target Rio Tinto Group said the market for the red metal is “slightly oversupplied but not in a material way”. Speaking before Glencore’s announcement, Jean-Sébastien Jacques said in an interview in Singapore that copper’s supply-demand is “not far away from being balanced”.
That contrasts with minerals such as iron ore, where prices have collapsed after major miners ramped up supply to increase market share, and other metals used in steelmaking such as nickel.
“The proactive management of copper should not only reduce operating costs but also support the copper price,” analysts from Sanford C Bernstein wrote in an email after Glencore’s announcement. The metal in London rose 1.3% in London to $5 188 a metric ton after the news.
Together, Katanga and Mopani produced 127 000 tons of copper in the first half of this year, about 17% of Glencore’s total output of about 730 900 tons.
The facilities will be suspended for 18 months as the company builds new processing facilities that will lower production costs from more than $2.50 a pound, Glencore said. That’s higher than the closing price for Comex copper last week of about $2.31 a pound.