Glasenberg Sees Advantage in Glencore’s Lack of Iron-Ore Mines

May 20, 2014 8:10 am ET

May 20 (Bloomberg) -- Glencore Xstrata Plc billionaire Chief Executive Officer Ivan Glasenberg believes the company’s reduced risk from falling iron-ore prices sets it apart from larger rivals BHP Billiton Ltd., Rio Tinto Group and Vale SA.

“We are not heavily exposed to iron ore except on the trading side and therefore we believe we have an opportunity against our peers there,” Glasenberg, Glencore’s second-largest shareholder, said today at the annual general meeting in Zug, Switzerland. “We are not big players in the iron-ore market.”

The iron-ore position of Glencore, the world’s fourth- biggest mining company, pales in comparison with BHP, Rio and Vale. The three together controlled about 60 percent of seaborne supply in the $170 billion trade last year. Thermal coal for power stations and copper are the biggest contributors to Glencore earnings. By contrast, Rio derived 88 percent of profits from iron ore last year.

“Prices are coming off because we see massive expansions coming there from our major competitors,” Glasenberg said at the Zug meeting. “They continue to expand these brownfields and put more supply into the market.”

Iron ore, used to make steel, this week slipped below $100 a ton for the first time in almost two years on speculation slowing growth in property prices in China, the biggest user, will damp demand and worsen a glut in global seaborne supplies.

The benchmark price of iron ore delivered to China’s Tianjin port has lost 27 percent this year, reaching $97.50 a dry ton today, the lowest since September 2012, according to data from The Steel Index Ltd.

Mauritania Mine

Glencore does have some iron-ore capacity, and approved a $900 million iron-ore project in Mauritania earlier this year. The mine, to produce 7 million metric tons a year, is expected to start output in 2017. The company, the world’s largest listed commodities trader, increased its iron-ore trading business 68 percent last year to 33.2 million tons.

Peter Grauer, the chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director of Glencore.

Glencore is the biggest exporter of coal burned in power stations and has interests in more than 35 coal mines in Colombia, Africa and Australia. It is developing and expanding copper mines in Africa. The company is more positive on the outlook for commodities like nickel, zinc, copper and coal, Glasenberg said.

“We believe we have assets in the right sectors which we like,” he told shareholders.