Glencore to halt cobalt operation amid plunging prices

Glencore is set to close its Mutanda cobalt mine in the Democratic Republic of Congo amid tumbling prices for the battery metal and global uncertainty caused by the US-China trade war.

The decision was made in response to reduced economic viability in the current market environment, primarily in response to low cobalt prices.

While Glencore’s key commodity average price benchmarks for copper, zinc, lead and nickel were all lower period on period, cobalt was particularly weak due to a market oversupply, according to the company.

Glencore plans to transition the Mutanda mine to temporary care and maintenance by year end.

“We continue to progress studies on the (Mutanda) sulphide project, having the potential to extend operations for many years, and anticipate being able to provide an update at our investor day in December,” Glencore chief executive Ivan Glasenberg said.

“We will continue to progress our studies on the Mutanda sulphide project, which has the potential to provide a long-term life of mine.”

Glencore, meanwhile, has shown revenue growth across its coal portfolio in Australia in the first half of 2019 on the same period last year.

Global seaborne thermal coal demand during the period is estimated to have grown around 6.3 per cent compared with the same period last year.

Glencore also saw ongoing strength in Pacific demand growth of six per cent (or 23 million tonnes), more than offsetting a six per cent (or five million tonnes) demand decline in the smaller Atlantic market.

Chinese restrictions on the purchase of Australian thermal coal, however, reduced the flow of the commodity to China by 14 per cent in the first quarter compared with the corresponding period last year.

Meanwhile, Chinese coking coal imports in May year to date were up 25 per cent (or 3.1 million tonnes), reflecting an increasing need for imported high coke strength, low sulphur coking coals, according to Glencore.

Company revenue from its copper (Mount Isa, Ernest Henry and Townsville in Queensland and Cobar in New South Wales), zinc (Mount Isa in Queensland and McArthur River in the Northern Territory) and nickel (Murrin Murrin in Western Australia) assets, meanwhile, have collectively declined.

Heightened global trade policy tensions, US dollar strength and volatile interest rate curves proved to be “the central influences” on markets during the half.

Glencore saw a decline of 11 per cent in copper price compared to the first half of 2018, dropping to $US6167 ($9120) a tonne after reaching highs above $US6500 in mid-April.

This is followed by continuing uncertainty around trade and tariffs, adversely affecting global manufacturing sentiment and growth expectations, according to Glencore.

There is also a downside risk to global growth and nickel offtake if a resolution on the US-China trade war is indefinitely put on hold.

“Our performance in the first half reflected a challenging economic backdrop for our commodity mix, as well as operating and cost setback within our ramp up or development assets. Adjusted earnings before interest, depreciation and amortisation (EBITDA) declined 32 per cent to $US5.6 billion,” Glasenberg said.

“The rest of our business, however, remained strong and performed well.”

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