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Glencore trading profit poised for best-ever year

Prices for most of what Glencore mines, including thermal coal, have reached record highs in recent months. (Image courtesy of Glencore.)

Glencore (LON: GLEN) said on Friday that first half-year profit from its commodities trading unit is on track to achieve its annual earnings target in the first six months of 2022, placing it on course for its best-ever year.

The Swiss company said that “unprecedented dislocation” in energy markets has resulted in record pricing differentials between coal benchmarks and quality categories.

Glencore expects adjusted operating profits to exceed $3.2 billion for the first half of the year boosted by soaring commodity prices, supply disruptions and volatility. The figure compares to the record profit of $3.7 billion the company recorded in full-year 2021 and it also beats its long-term guidance range of $2.2 billion to $3.2 billion.

Prices for most of what Glencore mines, including thermal coal, have reached record highs in recent months as a result of market volatility, shortages triggered by covid-related lockdowns and the Russian invasion of Ukraine.

The miner and commodities trader increased its forecast for thermal coal benchmarks in the first half to between $82 and $86 per tonne from a February forecast of $32.8 per tonne for the year.

With costs increasing due to the broad inflationary pressure coming from rocketing diesel and electricity prices, the company expects its average FOB (freight on board) thermal unit cost for the first half to be $75-$78 per tonne, compared to an earlier guidance of $59.3 for 2022.

This reflects higher government royalties and input costs for diesel, explosives, logistics and electricity.

Glencore noted market conditions would probably be closer to normal in the second half of the year, adding it would release its first-half production report on July 29 and half-year financial results on August 4.

The company’s coal mines generated in 2021 adjusted earnings before interest and tax of $3.06 billion, contributing to the $14.5 billion earnings total Glencore posted for the past year.