MINING giant Glencore recorded a $US2.6 billion ($3.7 billion) half-year loss to June 30, blaming COVID-19 for hitting every impact of its business.
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Its accounts show minority shareholders in Glencore operations lost another $US1.9 billion ($2.7 billion), for a consolidated loss of $US4.5 billion ($6.3 billion).
The half-year accounts are unaudited and coal is only one of many commodities mined and traded by Glencore.
But the size of the hit on one of the Hunter's two biggest coal companies (along with Yancoal) can be seen in its revenues for the six months, which fell to $US70.9 billion ($99.8 billion), down from $US107.4 billion ($151 billion) the same time last year.
As the Newcastle Herald reported earlier this week, Glencore has announced plans to cut Hunter coal production by 14 per cent, and job losses are feared at a range of mines.
In an online hookup with analysts and journalists yesterday afternoon, Glencore chief executive Ivan Glasenberg talked up "solid" earnings of $US4.8 billion ($6.7 billion) before income tax and depreciation, although the results were "disproportionately impacted by lower coal prices".
The future of the coal business was one of the first questions posed by analysts, but Mr Glasenberg made it clear there were no plans to spin coal into a separate company, saying it was still delivering good cash returns despite the downturn, and very much part of Glencore's plans for the future.
The 86-page earnings report and a series of slides showed the difficulties facing thermal coal, however, with Newcastle prices down 30 per cent.
Glencore's margins - the difference between selling price and cash production costs - have shrunk from $US26 a tonne last year to $US14 a tonne in the six months to June 30 and a predicted 2020 full-year figure of $US11 a tonne.
They are based on a Newcastle price of $US60 a tonne, which is substantially above recent spot prices, but would likely be more in line with Glencore's long-term contracts.
Despite Glencore's stated support for thermal coal, pressure on the commodity continues to grow. Glencore said it would cut scope 3 emissions by 30 per cent by 2035, including "natural depletion" of coal and oil resources.
Tim Buckley from the Institute for Energy Economics and Financial Analysis said Glencore's coal results combined cyclic impacts from coronavirus and structural decline as renewable energy became more affordable.
"It's expensive coal or cheap solar," he said.
He said the decline was obvious across the report, including a 20 per cent drop in coal sale volumes, and a 23 per cent fall in revenue from its Australian mines, from $US3.1 billion in the first half of 2019 to $US2.4 billion.
Mr Buckley said Glencore's "cash costs" did not include royalties and finance costs.
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Ian Kirkwood
Reporting journalist at the Newcastle Herald since 1987. Editorial writer, general reporter, industrial relations, industry and coal.
Reporting journalist at the Newcastle Herald since 1987. Editorial writer, general reporter, industrial relations, industry and coal.
