​Glencore sees drop in earnings in latest results as Glasenberg slams iron ore market tactics

Glencore has announced a drop in earnings year on year, seeing a fall in EBITDA and net income in its latest results.

In the same announcement Glencore CEO Ivan Glasenberg also took to the stage to clarify the miner’s position on the coal market, comparing it favourably to the tactics being seen in the iron ore sector.

The miner saw an adjusted EBITDA of $12.8 billion for 2014, a small drop of two per cent year on year from $13.1 billion in 2013, while it recorded a seven per cent drop in net income, falling to $4.3 billion from $4.6 billion the previous year.

It pointed to the shrinking commodity market as the main culprit behind this fall.

In spite of weakened results it recorded an increase in dividends, rising nine per cent year on year.

This increase in dividend was explained by Glasenberg as a focus on returning “excess capital in the most sustainable and efficient manner”.

He went on to state: “Glencore will continue to focus on maximising the value of the potential within our businesses.”

However, while it saw a drop overall it was Glasenberg’s position on the state of the mining market that captured much of the attention, as he slammed the current ‘flooding tactics’ underway in iron ore.

Speaking on the miner’s decision this last week to cut 15 million tonnes of coal from production, Glasenberg explained that Glencore doesn’t “want to be the ones forcing the price down with oversupply,” according to the Sydney Morning Herald, comparing the difference between the coal and iron ore sectors.

"Even though they are profit-making tonnes, we would rather remove it from the market, because we believe those tonnes will affect the market price and affect our balance…so much that the loss of profit on the 15 million-tonne cut compensates for how it would hurt your (global output of) 150 million managed tonnes. That is very important."

This isn’t the first time Glasenberg has voiced this opinion of mismanagement in iron ore, having slammed market last year, laying the blame for iron ore’s fall directly on the shoulders of BHP, Vale, and Rio Tinto.

Glasenberg stated that by withholding tonnes the market can address the oversupply problem, a position echoed by fellow coal miner Anglo American.

According to Anglo American CEO Mark Cutifani coal mines will be closed or suspended at a steady rate until reduced supply drives a price recovery, adding that globally they will most likely shut at a rate of around one every two to three weeks until the lack of supply finally affects price.

Seamus French, Anglo American Coal's CEO, at the time clarified: "Significant reductions in operating costs and reduced mining activity have failed to offset the impact of a weakening metallurgical coal price."

"As a result, we have been forced to take further action in response to the weak market conditions, so that we can preserve the long-term future of the operations."

"What is key is we will cut back because we don't want to be the ones forcing the price down with oversupply," Glasenberg said, refuting Rio and BHP’s position that falls in tonnages will be filled by other miners.

"Other people in other commodities have used the argument that 'someone else will fill that hole, so if we cut back 15 (million tonnes) we are going to look pretty stupid'.

"But we don't believe that where we cut production, that anyone is going to fill that gap. We know the market.”

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.