Glencore Plc (GLEN.L)
- Simply Wall St.
An Intrinsic Calculation For Glencore plc (LON:GLEN) Suggests It's 25% Undervalued
Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Glencore plc...
- Bloomberg
How High Can Copper Fly? This Metals Trader Expects $12,000
(Bloomberg) -- Copper could surge above a record to $12,000 a ton in 18 months on new demand from green initiatives, a leading metals trader said, giving one of the most bullish forecasts yet for the metal.The bellwether material has already doubled since a nadir in March to reach a nine-year high, and is roughly 7% below the record of $10,190 set in 2011 as bets on an economic recovery and tighter supplies entice investors. But current prices would seem “far too low” if governments fulfill pledges for green infrastructure and electric-vehicle incentives, Concord Resources Ltd. said.“People need to be aware of the potential for a changing paradigm in terms of pricing,” said Mark Hansen, chief executive officer of the trading house. “In copper, the market is not yet pricing in the addition of potentially millions of new tons of copper demand over the coming decade.”If governments follow through with plans for greater electrification of economies, copper prices would need to climb to a level that prompts demand substitution and miners to invest in new production, according to Hansen.“It simply doesn’t happen at $10,000,” he said. “I would predict that if all those circumstances come true, we really need to see $12,000 copper to bring the market into balance and properly incentivize new production.”Aluminum may be among other metals to benefit as manufacturers look to substitute cheaper materials amid copper’s rally, Hansen said. Plus, pressure to clean up carbon-intensive sectors could lead to a cap on Chinese aluminum production, pushing prices to the “high $2,000s” from about $2,200 a ton now, he said.Concord is one of several mid-sized metals traders that compete with leading merchants Glencore Plc and Trafigura Group. The London-based company was profitable last year and delivered 3.9 million tons of raw materials to customers, Hansen said. Both Glencore and Trafigura have given optimistic views about the copper market, but neither has publicly made a forecast as bullish as Concord’s.Hansen said the main risk to his outlook was if governments fail to implement plans for green-stimulus spending. He also warned that any weakness in China’s economy would cause metals prices to stumble.Still, he sees any pullback as a buying opportunity, and pointed to low inventories following large imports by China last year.“The stocks that should have built in a recession and then you would normally draw down in an expanding economy are not there,” Hansen said. “That’s a very supportive factor.”Also, the retreat by some banks from commodity trade finance had restricted funding to producers, potentially further supporting prices.“There is a risk that because commodities have relatively been under-appreciated assets for most of the last 10 years, those of us in the industry aren’t recognizing the scarcity value of some of these markets with rapidly changing dynamics of demand,” Hansen said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
- Bloomberg
Former Mining Exec Details Suitcase Full of Cash He Used to Seal Deals
(Bloomberg) -- A former Glencore director said he used to fly the world carrying a bag full of cash to secure deals for the commodity trader, evidence of the industry’s longstanding history of corruption, a problem it’s still grappling with today.“I used to go with 500,000 pounds to London,” Paul Wyler who was one of Glencore’s most senior executives and a board director until 2002, said in an interview for The World for Sale, a book on the history of the commodity trading industry.In those days paying so-called “commissions” was both legal and even tax-deductible for a Swiss company, Wyler said, adding that Glencore’s past as a private company -- it went public in 2011 -- had been helpful. “We had advantages if we wanted to pay commissions. So if we wanted to pay certain things, we didn’t have to declare it in our annual report.”While Wyler put down his suitcase almost twenty years ago, some of the largest commodity traders face investigations today into alleged wrongdoing in countries from Democratic Republic of Congo to Brazil.“Unfortunately this is something that has plagued the commodity industry,” Torbjorn Tornqvist, the co-founder of oil trader Gunvor Group Ltd., said of bribery and corruption. “There’s a lot of skeletons and many of them, most of them, will never be surfaced.”The current range of investigations echoes the early 1980s, when Marc Rich, founder of the company that became Glencore, was indicted for tax evasion and buying oil from Iran in defiance of sanctions. The saga, which brought Rich infamy, has long haunted public perception of the industry.Glencore, the world’s largest commodity trader, is currently being investigated by authorities in the U.S., U.K., Brazil and Switzerland. The trading house has said the U.S. Department of Justice has requested records dating from 2007 onwards, several years after Wyler left the company.Trafigura Group, the second-largest metals and oil trader, faces charges in Brazil that it paid kickbacks to win business with the state oil company. Trafigura has denied the allegations. Vitol Group, the largest oil trader, in December admitted to bribing government officials in Brazil, Ecuador and Mexico -- in some instances as recently as July 2020.Wyler acknowledged the corruption in Glencore’s history, but insisted: “It’s not like that we got the business only because we paid everybody off.”“In many countries it was just a no-go,” said Wyler, who contemporaries say would probably have become CEO of Glencore if Ivan Glasenberg, the company’s current boss, hadn’t been chosen instead. “You couldn’t pay commissions in Japan, or you couldn’t pay commissions in Chile, or in most of Western Europe it wasn’t really that widespread. In South America, yes... And, yes, in China it was very corrupt.”A Glencore spokesman declined to comment. The company has previously said that it takes ethics and compliance seriously, and that will cooperate with the investigations into it.Although largely unknown beyond the world of commodity trading, companies like Glencore, Vitol, Trafigura and Cargill Inc. have become crucial cogs in the global economy, making billions of dollars of profit every year and supplying a large share of the essential goods of modern life, from crude oil to wheat and copper.Other traders spoke of an industry where conflict has been seen as an opportunity for profit.Igor Vishnevskiy, the former head of Glencore’s Moscow office, described the company’s successful trades in Tajikistan in the midst of the bloodiest conflict of the disintegration of the Soviet Union in the 1990s: “It was a stunning business, actually, because it was a civil war.”Many say that the industry, under pressure from investigators and regulators, has changed. Several large trading houses have cut back on their use of agents, the third parties which in some cases were seen as a means for outsourcing bribe-paying.Tornqvist, the Gunvor CEO whose company was forced to pay $95 million by Swiss prosecutors in 2019 after one of its employees bribed officials in the Republic of the Congo and Ivory Coast to secure oil deals, said: “The old-style traders, the Marc Rich diehard breed, some of them don’t quite get it. Until they’re sitting and talking with the FBI. Then they get it.”(This story is based on extracts from Blas and Farchy’s book, The World for Sale, to be published tomorrow in the U.K. by Random House Business and by Oxford University Press in the U.S. on March 1.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
