Glencore takes heat as losses pick up speed
THE rout across metals and mining shares accelerated yesterday as evidence of China’s slowdown renewed investor worries and analysts said prices were heading lower.
Glencore tumbled as much as 16%, the most to date, and slid below 100p for the first time since it began trading in 2011. Anglo American touched a 15-year low and Antofagasta sank 7%. KAZ Minerals, a small copper miner in Kazakhstan, lost 25%.
Mining companies are suffering under the lowest commodity prices in more than a decade and no signs of a turnaround in China’s economy. The largest companies in the industry have scrapped dividends, cut jobs and sold new shares to preserve profitability as the slump in raw-material prices continues.
“There’s broad-based weakness across most miners today,” said Gavin Wood, chief investment officer at Kagiso Asset Management in Cape Town. “Glencore is more leveraged, somewhat higher cost than the other producers such as BHP (Billiton). Glencore … doesn’t have the quality of assets that some of the others do.”
Credit Suisse Group cut its price estimates for large diversified miners including Glencore and BHP Billiton.
“Until China demand and emerging-market currencies find a floor, it will remain challenging to put an absolute floor on commodity prices,” Credit Suisse analysts led by Liam Fitzpatrick wrote in a note yesterday.
BHP Billiton said yesterday it was planning to sell hybrid securities to help refinance nearterm liabilities.
The world’s biggest mining company reported a 52% drop in underlying full-year earnings last month, highlighting its challenges as CEO Andrew Mackenzie seeks to trim capital spending.
European steel producers slumped after Outokumpu Oyj said third-quarter delivery volumes might be 10% lower than the previous quarter. The stock sank as much as 19%. Luxembourg-based Aperam fell 11%.
The Asian Development Bank cut its growth forecasts for China and said its waning appetite for raw materials would hurt commodityfocused export economies such as Mongolia and Indonesia.
The oversupply in copper would double to 598,000 tonnes by 2017 and prices were expected to decline, Nomura Holdings said in a report on Monday.
Copper declined 3.1% to $5,105 a metric tonne. Zinc sank as much as 1.8% to $1,628 a tonne, the lowest in five years. European coal for 2016 dropped below $50 a tonne for the first time.
Glencore, which sells all three commodities, sank 14% at 102.55p in London afternoon trading. It earlier touched 99.59p, the lowest since the company’s $10bn initial public offering in May 2011.
The stock is this year’s worst performer in the FTSE 100 index after falling 66%.
“Glencore is a bet on copper, and weakness in metal prices is sending tremors through Glencore’s shareholders,” said Richard Knights, a mining analyst at Liberum Capital in London.
Credit Suisse Group cut its price estimates for large diversified miners