Mining group Glencore raised earnings guidance for its trading business, citing higher commodity prices, and said on Thursday increased take-up of electric vehicles and demand for energy storage would boost demand for its products.
Following the commodities downturn of 2015-16, big miners have repaired their balance sheets to help position themselves for growth. Glencore has cut debt and also has a mix of assets that could help it benefit from an upsurge in electric cars.
The company raised full-year guidance for adjusted earnings before interest and tax (EBIT) in its trading or marketing business by $100 million to a range of between $2.4 billion and $2.7 billion.
“With higher commodity prices, our marketing business does perform better, more arbitrage opportunities exist,” CEO Ivan Glasenberg said on a conference call, noting demand for commodities looked strong and new supplies limited.
As a leader in cobalt and with strong nickel, zinc and copper output, Glencore relishes the prospect of higher take-up of electric cars.
NEW SOURCES OF DEMAND
“The potential large-scale roll-out of electric vehicles and energy storage systems looks set to unlock material new sources of demand for enabling underlying commodities, including copper, cobalt, zinc and nickel,” Glasenberg said.
Reuters reported in July Glencore had signed a deal to sell up to 20,000 tonnes of cobalt products to a Chinese firm, which in turn helps Volkswagen secure car batteries.
It is difficult for other producers to challenge Glencore’s cobalt dominance as cobalt is concentrated in the politically unstable Democratic Republic of Congo and is a by-product of copper.
Over time, Glasenberg said battery makers would seek alternatives to cobalt because of the prospect of high prices and uncertain supplies.
For other major players, the fluidity of the market as auto makers develop technology is a challenge, and materials such as lithium, also used in batteries, have been dominated by smaller players so far.