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Glencore riding energy crunch to record profits

Glencore

Glencore is earning more money in a six-month period than it would in a typical calendar year amid booming thermal coal prices.

The major miner said its commodities trading unit was on track to post a $US3.2 billion ($4.6 billion) EBIT (earnings before interest and taxes) for the six months to June 30, nearing the record profit the division enjoyed in the 2021 calendar year ($US3.7 billion).

To put that into perspective, Glencore’s long-term guidance for annual EBIT is between $US2.2–3.2 billion.

It comes as the company forecasts its thermal coal benchmarks to rise from $US32 per tonne (as announced in February 2022) to between $US82–86 per tonne (t) for the half year. This has coincided with the Newcastle thermal coal price ballooning from $US175/t to $US318/t across the same timeframe.

While earnings have jumped, so have costs and Glencore said it was poised to increase its FOB (free on board) thermal unit cost from an earlier 2022 guidance of $US59.3/t to between $US75–78 for the six-month period. The company has felt the pinch of rising prices for fuel, electricity and logistics.

With Russia–Ukraine war continuing to destabilise commodities, Glencore said its trading unit had responded to the cause.

“Our marketing business has successfully navigated the extraordinary global challenges faced during the period, being a source of continuous and reliable commodity supply to our vast customer base,” the company said in a statement.

“Against this challenging and elevated risk backdrop, our marketing segment’s financial performance has continued to be supported by periods of heightened to extreme levels of market volatility, supply disruption and tight physical market conditions, particularly relating to global energy markets.”

Several commodities have reached record high prices in the midst of the Russia–Ukraine conflict, with coal producers a particular beneficiary given Europe’s denial of Russian energy sources.

Glencore operates 17 coal mines across New South Wales and Queensland.

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