Glencore Gloom Envelops Rivals as Asia Commodity Shares Drop

  • Glencore shares fall almost 30% in Hong Kong amid debt concern
  • Producers, traders drop from Japan to Australia on Tuesday

Asia’s biggest commodities companies tumbled from Sydney to Tokyo as the collapse in Glencore Plc’s stock highlighted the threat of sliding raw materials prices amid China’s economic slowdown.

The company’s almost 30 percent plunge in London on Monday reverberated around Asia as Australian miners BHP Billiton Ltd. and Rio Tinto Group slumped with trading companies including Noble Group Ltd. PetroChina Co. was among Chinese oil explorers caught up in the selloff. While Glencore sank by a record in Hong Kong as trading resumed after a holiday, its stock was 6.7 percent higher at 8:50 a.m. in London.

Returns from raw materials plummeted last month to the lowest level since 1999 as supplies outstrip demand amid forecasts for the slowest Chinese growth in more than two decades. Glencore, which rode a commodity boom fueled by the Asian nation in the past 10 years, is emerging as the most prominent casualty of the bust.

“Glencore’s fall was significant due to its prominence and size, and the plummet was in part triggered by perceived inadequacy in efforts to reduce its debt amid deteriorating mining prospects,” Bernard Aw, a strategist at IG Asia Pte in Singapore, said by e-mail. “Miners will certainly be hurt by the slowdown in China as it is the largest global consumer for metals as well as energy.”

Profits for Chinese industrial companies tumbled the most in at least four years, with the biggest drops concentrated in producers of coal, oil and metals, the nation’s statistics bureau said Monday.

Shares in Baar, Switzerland-based Glencore dived as much as 31.6 percent to HK$8.40 on the Hong Kong Stock Exchange on Tuesday. They were up 4.59 pence at 73.21 pence in London after plunging 29.4 percent in the previous session. BHP fell 6.7 percent in Sydney while Rio Tinto lost 4.6 percent. Cnooc Ltd. and PetroChina slid to lowest intraday level since March 2009.

Noble, the commodities trader criticized over its accounting methods, retreated 11.2 percent in Singapore, paring an earlier slump of almost 15 percent to a seven-year low. In Tokyo, Marubeni Corp. dropped 7.9 percent, the most in four years, and Mitsui, Japan’s second-biggest trading house, fell the most in about seven years based on closing prices. Switzerland’s competition regulator identified a unit of Mitsui and six banks on Monday as part of a probe into whether they colluded to manipulate the prices of gold, silver and other precious metals.

Mining Slump

The Bloomberg World Mining Index of producers fell 1.7 percent on Tuesday, deepening losses this year to about 34 percent. Excess supplies and a sluggish world economy mean it’s “hard to argue that most commodity prices have reached their trough for the year,” Citigroup Inc. analysts led by Ed Morse, the global head of commodities research, said in a report last week.

“There’s still obviously a lot of concern about Chinese growth at the moment and any sort of indication that that could continue is certainly being grabbed on by the market quite strongly,” Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney, said by phone. “The release of industrial profits showing China slowing again is another factor, another round of bearish data.”

The Bloomberg Commodity Index, a measure of returns for 22 components, has tumbled about 15 percent since June 30, heading for the worst quarter since the end of 2008. It was little changed after sliding 1.3 percent on Monday.

Glencore is Australia’s biggest producer of thermal coal and one of the main grain exporters from the country, according to the company’s website. It operates Australia’s deepest underground copper mines.

The company has hired Citigroup and Credit Suisse Group AG to sell a minority stake in its agricultural business, a person familiar with the situation said Friday. The sale is part of the debt-cutting program announced earlier this month that included selling $2.5 billion of new stock in an attempt to reduce the company’s debt to $20 billion from $30 billion.

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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