Glencore Plummets to Record After Copper Joins Commodity Slump
(Bloomberg) — Glencore Plc, the world’s third-biggest copper producer, plummeted to the lowest on record in London trading after the metal used to make pipes and wires fell the most in six years amid a broader collapse in commodity markets.
Glencore slid 9 percent to 244.15 pence by 9:42 a.m. in London. That’s a record low and caps a 54 percent decline from the Baar, Switzerland-based company’s $10 billion initial public offering in 2011 when it sold shares at 530 pence apiece.
Kazakhstan copper producer Kaz Minerals Plc and Vedanta Resources Plc, which produces the metal in India and Zambia, both plunged as much as 20 percent in London. Chilean miner Antofagasta Plc dropped as much as 13 percent.
The world’s biggest mining companies have been hurt by a slide in commodity prices including steep falls in iron ore, coal and oil as a supply glut collides with sluggish demand. Copper’s decline triggered a dip in the Bloomberg Commodities Index to the lowest in 12 years.
“Copper has been the last domino to fall in terms of the major commodities,” Richard Knights, a mining analyst at Liberum Capital Ltd. in London, said today by phone. “Iron ore, thermal and coking coal are already trading within the industry cost structure, and if you go back three years these commodities were about 75 to 80 percent of earnings in the sector.”
The price of copper on the London Metal Exchange tumbled the most in six years, dropping as much as $506.75 a metric ton to $5,353.25, the lowest intraday price since July 2009. The metal was trading 6.2 percent lower at $5,498 a ton at 9:44 a.m. in London.
Lower energy costs and demand weakness amid worse-than- expected economic data in China are driving prices down, according to Goldman Sachs Group Inc. Consumption in the world’s biggest user will grow at the slowest pace since at least 2010, Deutsche Bank AG estimates.
Copper is one of the biggest drivers of profit at Glencore which has mines in Africa, Australia and South America. A $350 fall in the price of copper results in a $350 million reduction in sales for the company, Numis Securities Ltd. analysts wrote in a note today.
“About 45 percent of Glencore’s earnings before interest and tax comes from copper on our numbers,” Liberum’s Knights said. “It’s certainly the commodity that Glencore is most leveraged to and out of the four major mining companies Glencore has the most earnings exposure to copper.”
To contact the reporters on this story: Jesse Riseborough in London at jriseborough@bloomberg.net; Firat Kayakiran in London at fkayakiran@bloomberg.net To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alex Devine
