Glencore says business unit set for solid year on commodity price swings

Glencore faces another strong year for its trading business as the London-listed miner benefited from price swings and market volatility caused by Russia’s invasion of Ukraine.

Profits for its marketing unit will be “comfortably” above the upper end of its guidance range of $2.2 billion to $3.2 billion based on first-quarter performance, the group said in a statement Thursday. If achieved, it would make it the third year in a row that the unit has exceeded its range.

“Our marketing activities were supported during the quarter by tight physical market conditions and periods of extreme market volatility,” Chief Executive Officer Gary Nagle said in a production update.

Glencore’s comments suggest that commodity traders with access to deep credit lines have taken advantage of opportunities for arbitrage and reorganization of trade flows triggered by sanctions imposed on Russia.

The group’s shares added 1% at the start of trading in London on Thursday. They have increased by almost 30% this year.

News from Glencore’s mining activity was not so positive, with the company slashing its copper and cobalt production forecast due to difficult ground conditions. The group also lowered its outlook for zinc.

However, Glencore’s coal mines increased production in the quarter despite heavy rains in Australia and South Africa. Production rose by 4 million tonnes a year ago to 28.5 million tonnes, boosted by a deal to take control of a major coal mine in Colombia.

Koniambo, the company’s nickel asset in New Caledonia, also saw an improvement in performance.

The world’s biggest miners have had a tough start to the year with companies like Anglo American, BHP, Rio Tinto and Vale struggling to meet production targets and control costs amid Covid-19 disruptions and to broader inflationary pressures.

Glencore’s production update ahead of its annual shareholders meeting in Switzerland on Thursday as the group faces the threat of investor dissent.

Influential proxy advisers have urged shareholders to reject the progress report on its climate strategy over concerns over thermal coal, a fossil fuel burned in power plants to generate electricity.

The UK’s Local Government Pension Scheme said it would vote against the report, citing shortcomings in target setting over the next decade.

“We therefore consider it particularly important for a company like Glencore to provide clear and solid objectives that show a Paris-aligned trajectory over the next 10 years,” he said.

If more than 20% of the votes cast at the meeting are against the report, Glencore said it would engage with major shareholders to understand areas of concern and consider appropriate changes to its climate plan.

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