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War in FSU hits Glencore zinc, boosts trading revenues

The volatile geopolitical situation is bearing fruit for Glencore’s trading business, even as it hits the production of zinc.  
War in FSU hits Glencore zinc, boosts trading revenues War in FSU hits Glencore zinc, boosts trading revenues War in FSU hits Glencore zinc, boosts trading revenues War in FSU hits Glencore zinc, boosts trading revenues War in FSU hits Glencore zinc, boosts trading revenues

"Following the exceptionally strong marketing performance in the first half of the year, we currently expect a significantly reduced, but still above-average second-half contribution," Glencore said.

Contributions from the trading arm are expected to be over US$1.6B.

Glencore's trading business traditionally benefits from market volatility, as the company hedges against market movements. This means that the company has been benefitting from the unsettled global picture, even as it trims its zinc guidance by 6% due to the effects of the Russian invasion of Ukraine, which continue to spread ripples through global supply chains.

The miner and metals trader reported zinc production of 699,600t over the first nine months of 2022, and revised the midpoint its full year guidance by 65,000t, to 945,000t. Meanwhile lead production is down 21% year-on-year, at 136,900t.

The drop in output is driven by lower expected production from Kazzinc, Glencore's Kazakhstan-based zinc, copper and lead business. The company reported "emerging supply-chain issues in Kazakhstan as the secondary impacts of the Russia/Ukraine war are felt".

There was also mixed news from Glencore's Katanga mine

"Glencore's Q322 was tougher than expected overall," an analyst note from BMO said.

"We had expected that Glencore would have a tough Q3 within the context of continued industry production challenges and very challenging weather for its Australian coal business, and this was indeed the case," RBC said in a note.

Glencore shares fell by 2.7% in London on Friday.