Pressure is piling up on Glencore’s chief

FOR a while it looked like Glencore had turned the tide.

Billionaire chief executive Ivan Glasenberg’s $10 billion (R142bn) debt-cutting plan, vivified with asset sales and output cuts, breathed life into a collapsing share price. Now with the stock falling again, pressure is back on to drive those efforts harder and faster.

Before yesterday, the Swiss firm had dropped for nine consecutive days in London, the longest streak on record. That 29 percent slump, as prices for the copper and zinc that Glencore produces reached six-year lows, wiped about $8bn off the company’s value.

“If all else remains unchanged, it’s going to be back to the drawing board,” said Marc Elliott, the mining analyst at Investec, whose bearish research note seven weeks ago was a spur for a record daily decline in Glencore’s shares. “Perhaps not to the same degree, but they’re going to have to take more action.” Elliott advises investors to sell.

Glencore has lost $45bn in market value this year amid a commodities rout that is crushing prices from aluminium to oil and tin, and presenting Glasenberg with his greatest challenge since becoming chief executive in 2002.

While he is hitting debt-cutting milestones – a $2.5bn share sale, a $900m asset disposal, $2.4bn saved by halting dividends, progress offloading a stake in its agriculture business – the question is whether tumbling demand in China, the biggest commodity consumer, will not overcome all endeavours. Glasenberg cleared one hurdle on September 28, when the stock tanked 29 percent as Investec questioned whether weak metals prices would erase Glencore’s equity value.

The shares recouped all their losses within a week and headed higher on a flurry of statements on cutting mine output and selling assets, as well as calming words on the producer’s solvency.

Double value

At one point, the stock more than doubled its value from the nadir. But for all his efforts and undoubted talents, even Glasenberg cannot hold back the sea. As long as prices for the commodities that Glencore mines keep sliding, the weakness will play out in its shares. Glencore’s shares in London fell as much as 3.5 percent to 85.73 pence yesterday, the lowest intraday level since September 30, before rebounding to trade 2.4 percent higher at 90.98p at 9.56am in London.

“I don’t think the risk around Glencore is getting much worse,” Chris LaFemina, a mining analyst at Jefferies with a hold rating on the company, said. – Bloomberg