Glencore Sticks to Cutbacks Promise as Metals Output Drops

  • Zinc production fell 28% in first quarter; copper down 4%
  • Company keeps earnings guidance at trading division unchanged

Glencore Plc kept a pledge to produce less metal following last year’s price rout and maintained its earnings outlook for the trading unit.

Zinc output slid 28 percent in the first quarter from a year earlier to 257,100 metric tons, the Baar, Switzerland-based company said in a statement on Wednesday. Copper production fell 4 percent even as South American output rose, while the firm mined 17 percent less coal. It said it’s sticking to previous output forecasts for all commodities, except oil.

"Volumes in-line with expectations and maintaining guidance is reassuring that the group is in control of its actions," Heath Jansen, an analyst at Citigroup Inc. in London, said in an e-mailed note.

Some of the biggest miners have been forced to shutter unprofitable operations, trim costs and sell assets to reduce debt in response to slowing demand from top user China. Shares of the firm, led by billionaire Ivan Glasenberg, have surged in London this year after ending 2015 as the second-worst performer in the FTSE 100 Index.

Glencore has previously said it will reduce copper output by about 7.5 percent this year and cut zinc supply by a quarter. The output cuts reflect a “disciplined approach to supply at low points in the commodity cycle," it said in the statement.

Glencore Shares

The shares lost 3.2 percent to close at 145.05 pence in London, valuing the company at about 20.9 billion pounds ($30.2 billion). The stock has climbed 60 percent this year as most metals rebounded. Most mining companies retreated on Wednesday.

While Glencore’s mining division lost almost $300 million last year, its trading unit generated adjusted earnings before interest and tax of $2.46 billion. It expects Ebit for the marketing unit to total $2.4 billion to $2.7 billion this year.

The company is the world’s biggest zinc miner and the move to reduce output of the metal is bringing the market closer to deficit. Prices rallied 13 percent since Glencore announced in October that it would curtail production.

It’s the second-largest producer of refined copper and has suspended operations in the Democratic Republic of Congo and curtailed output in Zambia. While copper output dropped because of the African cutbacks, production at South American mines expanded, the company said.

In other commodities:

  • Nickel production rose 16 percent from a year earlier to 27,600 tons.
  • Lead output fell 6 percent to 71,000 tons.
  • Coal output fell to 29.7 million tons.
  • Glencore cut its oil-production guidance for this year by 300,000 barrels due to a reduction in drilling.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a senior independent non-executive director at Glencore.

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