Glencore cuts production guidance as war, strikes and floods bite

Glencore has cut its guidance for zinc, nickel and coal production, as disruption from the war in Ukraine, flooding in Australia and industrial action have reduced its output.

The worsening outlook mirrors the rest of the mining industry, which is under pressure from bad weather, higher costs and supply chain challenges.

The Switzerland-based resources company, the world’s biggest publicly listed commodities trading house and one of the most profitable mining groups, lowered its guidance for coal — its biggest cash generator — by 9 per cent for the full year.

During the third quarter, Glencore’s production of coal, zinc and nickel from its mining operations was below expectations, forcing the company to reduce its full-year guidance for those products. The company posted record earnings of $18.9bn during the first half of this year.

Its share price fell 2 per cent to 489.35p on Friday morning. Glencore does not report third-quarter financial results, only output numbers.

The company, which trades commodities from oil and metals to carbon credits, said the miss on coal output was due to the La Niña phenomenon — a pattern of weather in the Pacific Ocean that brings wet weather and flooding to Australia. The group warned this was likely to continue in the fourth quarter.

The flooding in Australia has also hit coal production for other miners this season, including BHP and Anglo American. Duncan Wanblad, chief executive of Anglo American, said the company was feeling the “dislocations in the global economy”, pointing to energy costs and labour markets.

Tyler Broda, analyst at RBC Capital Markets, said: “We’ve seen across the entire industry during this period a very consistent underperformance, and higher costs coming through.

“We had expected that Glencore would have a tough third quarter,” he added, pointing out that the company will still benefit from high coal prices this year.

Its trading arm, which benefited from the significant volatility in commodities markets during the first half of this year, is expected to generate earnings of more than $1.6bn during the second half. That compares with $3.7bn in the first half.

On Friday, the company published the results of its shareholder consultation over climate strategy, a process that was triggered when 23 per cent of investors voted against its climate progress report.

Glencore said it would enhance the disclosures in its report, and provide more detail on its board management of climate activities.

The company cut its zinc guidance because of supply chain issues in Kazakhstan, reflecting the effects of the war in Ukraine. Nickel guidance was slashed due to strikes at mines in Quebec and in Norway.

Glencore has been in the spotlight this year after pleading guilty to charges of misconduct and market manipulation, following an investigation by US, UK and Brazilian authorities. It has set aside $1.5bn for fines and penalties related to those cases. A hearing in London to determine the UK penalty will be held next week.

Australian authorities also said on Friday that they had rejected Glencore’s application to expand the Glendell coal mine in the Hunter Valley region of New South Wales. The company said it was “extremely disappointed” with the decision.