Glencore and BHP Fall to Lowest in Years as Miners Shunned

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Glencore Plc and BHP Billiton Ltd. shares fell to the lowest in at least four years as investors continued to shun mining companies on concern Chinese demand for commodities is waning.

The FTSE 350 Mining Index of 14 producers fell for a second day to the lowest since March 2009. BHP, the world’s biggest miner, dropped to a six-year low while Glencore slid as much as 7 percent to the lowest since it started trading in 2011.

Commodity prices are near a 13-year low and this year’s 18 percent plunge in the Bloomberg World Mining Index wiped almost $200 billion off the value of the biggest producers. China, the biggest raw-materials user, this week devalued its currency in a move that supports exports and makes imports more expensive. That further spooked investors already concerned that consumption is falling as the country’s economy expands at the slowest pace in a quarter of a century.

“This is coming at a time when the market is capitulating anyway,” Marc Elliott, an analyst at Investec Plc in London, said by phone, referring to the weakening yuan. “There’s an air of panic about this. There’s a recognition about just how weak things are in China today.”

China’s yuan led a selloff in Asian currencies. It slid 1 percent in onshore trading even as people familiar with the matter said the People’s Bank of China intervened to stem losses. The devaluation raises the risk that Chinese exports will increase, adding more metal to markets that are already oversupplied.

Glencore Slumps

Glencore, the mining and commodities company led by billionaire Ivan Glasenberg, tumbled as much as 11 percent to a record low in Hong Kong Wednesday. The Baar, Switzerland-based company was down 4.8 percent at 181.80 pence ($2.84) in London by 2:12 p.m. local time.

BHP closed 4.3 percent lower in Australia and traded down 0.9 percent at 1,138.5 pence in London after touching the lowest since March 2009. Fortescue Metals Group Ltd., Australia’s third-biggest iron ore exporter, fell 8 percent in Sydney.

The cost of insuring against default on Glencore and Rio Tinto Plc’s debt rose to the highest levels in more than two years. Credit default swaps on BHP held near a three-year high, according to data compiled by Bloomberg.

“Nothing in mining is immune from the ongoing challenges,” Chris LaFemina, a mining analyst at Jefferies LLC, wrote in a report Wednesday. “An acceleration of supply growth and slowing demand growth have driven commodity prices lower.”

Steel Demand

China’s steelmakers cut output last month by 4.6 percent, a sign that the nation’s demand for the material is falling for the first time in a generation. Falling steel production will hurt demand for iron ore, which tumbled to the lowest since at least 2009 last month.

The Bloomberg Commodity Index of 22 materials added 0.4 percent on Wednesday. It reached the lowest since 2002 last week and is down 12 percent this year.

“There’s a realization that weak demand in China is going to impact a broader suite of commodities then just iron ore,” Richard Knights, an analyst at Liberum Capital Ltd. in London, said by phone.