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Glencore provides trading update

Published by , Deputy Editor
World Coal,

Glencore has provided the following updates concerning its coal Industrial business and Marketing business.

Industrial business

Glencore’s Industrial coal portfolio produces various quality specifications in three countries, destined primarily for seaborne thermal markets, but also for steel and domestic consumption. The company has seen unprecedented dislocation in energy markets over the year to date, at times resulting in record pricing differentials between the various coal benchmarks and quality categories.

Relative to the Newcastle thermal coal pricing benchmark, its coal portfolio mix adjustment guidance (which is used to calculate an overall realised price for the Group’s coal portfolio as a deduction against the Newcastle thermal coal price) has increased to reflect these larger differentials and portfolio composition.

The company’s February 2022 full year portfolio mix adjustment guidance of US$32.8/t (basis a Newcastle thermal coal forward average price at the time of US$175/t) is expected to increase to a range of approximately US$82 – US$86/t for 1H22, basis an assumed Newcastle thermal coal average benchmark price of US$318/t over the half (May YTD plus June forecast).

In line with the higher coal prices, government royalties have increased significantly relative to Glencore’s February cost expectations, which together with higher input costs (including diesel, explosives, logistics and electricity), are expected to result in an increase in its reported average FOB thermal unit cost for the period to approximately US$75 – US$78/t, compared to earlier guidance of US$59.3/t for 2022.

Marketing business

The Marketing business has successfully navigated the extraordinary global challenges faced during the period, being a source of continuous and reliable commodity supply to the vast customer base.

Against this challenging and elevated risk backdrop, Glencore’s 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.

Tracking YTD performance, Glencore expects its Marketing segment’s half-year adjusted EBIT to exceed US$3.2 billion (the top end of our long-term, through the cycle, Adjusted EBIT annual guidance range of US$2.2 – US$3.2 billion). It currently expects more normal market conditions to prevail in 2H22.

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