Glencore PLC said on Friday it saw ‘unprecedented dislocation’ in coal markets, resulting in record price differentials and soaring costs.
The Baar, Switzerland-based commodity trader and miner said its February portfolio mix adjustment guidance of $32.8 per tonne was expected to increase to a range of $82 to $86 a tonne for the first half ending June 30.
The assumed Newcastle thermal coal average benchmark price is $318 per tonne over the same period.
Glencore produces various quality of coal in three countries, destined primarily for seaborne thermal markets, and steel and domestic consumption.
The Newcastle thermal coal price is the most closely watched coal price benchmark and has a profound influence on global markets.
In line with high coal prices, Glencore said a significant increase in government royalties and higher input costs are expected to result in an increase in its reported average free on board, or FOB, thermal unit cost to between $75 and $78 per tonne in 2022, compared to February guidance of $59.3.
Glencore also said its Marketing business had ‘successfully’ navigated the ‘extraordinary’ global challenges faced during the period.
‘Against this challenging and elevated risk backdrop, our Marketing segment’s financial performance has continued to be supported by periods of heightened to extreme levels of market volatility, supply disruption and tight physical market conditions, particularly relating to global energy markets,’ it said.
The group expects Marketing segment’s half-year adjusted earnings before interest and taxes to exceed $3.2 billion, the top end of its adjusted Ebit annual guidance range of between $2.2 billion and $3.2 billion.
‘We currently expect more normal market conditions to prevail in the second half of the year,’ it said.
Glencore’s Marketing unit sources commodity products and sells them to customers across the globe, setting the firm apart from other mining firms who focus mainly on production.
Glencore expects half-year financial results on August 4.
Glencore shares were 1.3% higher at 470.15 pence each in London on Friday morning. In Johannesburg, the stock was down 3.6% at R 92.05.
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