Glencore & BHP Group Diverge On Net-Zero Commodities For A Sustainable Future Lost in Time
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Glencore is a multinational commodities mining and trading corporation engaged in producing and trading thermal coal, crude oil and a variety of future-oriented metals including copper, cobalt, aluminum and ferrochrome. In this context, Glencore is undoubtedly one of the largest natural resource companies globally, along with mining processing facilities in some of the largest resource producing areas in the world.
The organization’s headquarters are based in Baar, Switzerland. Established in 1974, the company was formerly named after its founder Marc Rich, who then sold the company in 1993 when it was renamed to Glencore.
According to the 2022 Half-Year Report (H1 2022) released by Glencore on August 4, 2022, the company’s revenues from global operations reached $1.34 billion in H1 2022 — a 43% change year-over-year (yoy) from $934 million in H1 2021. Overall global revenues amounted to $2.3 billion at the end of 2021, so it is likely that Glencore’s global revenues will surpass the preceding year’s profits by a wide margin.
CEO Mark Nagle attributed this performance growth to a volatile energy market driving both industrial and marketing revenues for Glencore’s business operations, which reached an earnings before interest, taxes, depreciations and amortization (EBITDA) amount of $18.9 billion in H1 2022 — -Marketing EBITDA collected $3.7 billion; Industrial EBITDA collected $15.0 billion; and Oil exploration and production (E&P) assets collected $558 million.
The massive pop in the industrial EBITDA was attributed to Glencore’s thermal coal operations during record prices of coal market price benchmarks, including the acquisition of the Cerrejón coal mine located in La Guajira, Columbia, by which it acquired the remaining 66% stakes from BHP and Anglo American for $588 million in January 2022, giving Glencore full ownership of the Cerrejón mine.
In addition, Glencore bought out the remaining stakes of the Rolleston thermal coal mine located in Queensland, Australia, shortly after acquiring the Cerrejón mine, giving it full ownership of the Rolleston mine as well.
As one of the world’s largest miners and commodities traders, the company’s exposure to thermal coal, crude oil and critical metals such as cobalt and zinc, has brought Glencore’s profit margins to exceedingly new highs.
Reuters reported that Glencore’s profits would exceed $3.2 billion [£2.6billion] in just the first half of this year (H1 2022). This is nearly the amount of profits the company made in the whole year of 2021, when the company held record profits of $3.7 billion. Therefore, Glencore is on its way to have another historical year in profits from the mining and trading of global commodities, which have been exacerbated by the ongoing Russia-Ukraine Conflict.
Moreover, since Glencore is one of the only countries that still has a full-fledged coal business, it has given the company extreme flexibility to give investors more returns through corporate buybacks and dividends.
Spotlight On Corruption in the UK has been following the SFO’s investigation proceedings against Glencore Energy UK Ltd. On the case, they added that “compensation for the victims of their alleged corruption in West Africa” must be acknowledged and enforced. After the announcement of Glencore Energy’s conviction of foreign bribery in UK courts, Spotlight On Corruption put out a statement on Twitter:
“We also need to see @UKSFO move swiftly to ensure that senior executives who approved or encouraged this bribery scheme are in the dock, to ensure real accountability and effective deterrence.”
Spotlight On Corruption believes in the mission to stop bribery worldwide. It can effectively build trust in public institutions, while strenghtening democratic governments and sustainable development initiatives. On their homepage, the NGO highlights to readers how “Spotlight on Corruption shines a light on the UK’s role in corruption at home and abroad.”
In doing so, the organization researches how the UK’s 2010 Bribery Act is implemented and how changes to relationships with foreign governments are affecting successful anti-corruption outcomes in UK courts. For example, since the UK’s exit from the European Union — Brexit — the Bribery Act has come under fire from the public in regards to its effectiveness in alleviating foreign corruption and economic crimes.
Organizations such as Spotlight On Corruption are working endlessly toward the mission of stamping out foreign corruption all over the world, by means of monitoring governments and their relationships with one another in both domestic and international economic, legal and political frameworks.
As for me, the facts are not on Glencore’s side in this case from any angle you look at it. On the other hand, the CEO transition gives Glencore the opportunity to show the public a new face along with the new rhetoric around sustainability and anticorruption measures, according to the company’s ESG frameworks, even though the new CEO Mark Nagle is by no means a new face to Glencore.
https://www.youtube.com/watch?v=c76pzDJQGWM
Glencore’s executives should at least acknowledge that compensation for the victims is a top priority of the company’s proceedings following the outcome of the case, for which a settlement could be forthcoming, thereby setting the stage for acknowledging that the company is indeed combating corruption in its corporate practices for mining and trading around the world.
Former CEO Ivan Glasberg spoke to Bloomberg about the massive surge in commodities demand before stepping down as CEO. The circumstances are giving Glencore the momentum to push on with its productions around the world and I don’t see how any change of administrative practices are going to genuinely occur over such a short period of time — a period of time that is crucial for Glencore to significantly raise profits and revenues during commodity markets volatility.
Legal research and analysis has taken on a much more important role in today’s society due to the international nature of many of the world’s biggest corporations and businesses. Along with the development of a interconnected global economy, there are more and more legal cases to be identified and analyzed in many areas of law. The outcomes of these cases, such as the agreement between Glencore and the DRC to resolve all present and future claims of corruption, have produced effects across borders and legal jurisdictions, which is why legal cases are significant to civic societies, the global economy and international politics.
Read a legal analysis about the case with this story: Glencore’s Oil Market Manipulation and Bribery Case Is On The Wild Side.
Why is the world’s largest metal miner BHP Group pushing for future facing commodities on the frontlines of ESG?
BHP CEO Mike Henry shared insights about the company’s Environment, Social, Governance (ESG) strategy at the 2021 Fidelity Sustainable World Summit. He was asked about the impact on the communities and stakeholders and how their managing the trade-offs between production and maintaining their ESG standards.
Not only was ESG a driving topic for all industries at the end of 2019, but BHP’s rival Rio Tinto was slammed by the global public for its mining blunder in Papua New Guinea in 2020, in addition to ongoing disputes over financing issues in Mongolia’s Oyu Tolgoi copper mine. This is a sign of the times for the global economy as miners like BHP group must produce metals while taking a more sustainable and environmental focus on their operations globally.
There are basically three main commodities in this future facing commodities space: copper, nickel and potash. The former two are both metals directly related to metal mining and stainless steel production, while the latter is primarily used as a source of fertilizer.
“We’ve needed to demonstrate ESG leadership over time. Not only do we need to be aware of what the needs of today are; we need to be able to look into the future and gauge how societal expectations are likely to change.”
The newest CEO of BHP couldn’t have arrived at a more critical time for the world’s largest metal miner. Mike Henry was officially transitioned into CEO of BHP Group in November 2019 when it was announced that he would succeed then-CEO Andrew Mackenzie. It should be pointed out that Mr. Henry had already been working for BHP in a variety of roles since 2003. This is in contrast to what happend with the recent CEO transition at the world’s largest fertilizer company Nutrien Ltd.
Mike Henry assumed the role of CEO on Janurary 1, 2020, as the former CEO of BHP told the public on his way out the door, “Fresh leadership will deliver an acceleration…that will come from BHP’s next wave of transformation. Choosing the right time to retire has not been an easy decision, however the Company is in a good position. I am confident Mike and BHP will seize the many opportunities that lie ahead.”
Little did anyone know what really lied ahead for the company: the global outbreak of COVID-19.
But before the global pandemic it was becoming well known to the public that Mr. Henry was “fully committed” to BHP’s climate change action plan and sustainability strategy. This was indicated by merger talks with Australia’s Woodside Petroleum for BHP’s oil and gas assets in the Gulf of Mexico and Western Australia. Not only is this about lowering the company’s GHG emissions and carbon footprint, as the name of the game since the Financial Times Mining Summit on October 8, 2021, has been about the company’s push to explore and produce future-facing commodities.
“We will be led by what’s happening in the world around us.”
No wonder CEO Mike Henry has treaded carefully when discussing the nature of the company’s expansion into future facing commodities — copper, nickel and potash. The concept is still new to most people in the global economy and public sectors.
It has already become synonomous in global business news with “tougher jurisdictions” that are associated with geopolitics and the global economy. Nevertheless, Mr. Henry told the FT Mining Summit in 2021 that BHP Group wants half of its revenues to come from the production and exports of these future facing commodities by 2030.
This implies that that the company will have to venture out to new areas containing the copper, nickel and potash production capabilities desired for such results.
It’s already known that the company has valuable production assets in Chile and Ecuador. So what’s uncertain at this point is how the company plans to expand into other places, for instance the Democratic Republic of Congo (DRC), where some of the world’s largest copper mines are available. To this point, geopolitical trends are likely to have an impact on BHP Group’s strategy to produce more copper, nickel and potash.
“For the world to de-carbonize it’s going to need a lot more metals, so something like two-times as much copper in the next thirty years…four-times as much nickel…two-times as much steel, and I think that’s an underappreciated fact.”
BHP Group intends to produce more metals while adhering to ESG practices and GHG emissions reductions. That’s why the company believes producing future facing commodities is not only a more profitable venture but also a sustainable option going forward.
In an interview with CNBC’s David Faber on March 4, 2021, CEO Mike Henry elaborated on the company’s climate investment program established in 2019, which he claimed gave the company “the lowest emissions intensity footprint of any of the major mining companies…in terms of Scope 1 and Scope 2 emissions…with a $400 million climate investment program” to reach Net Zero by 2050.
What all three of these future facing commodities have in common are their connections to the Energy Transition, with a growing demand for Clean Energy Technologies and Electric Vehicles (EV). Nickel is a critical battery material; Copper conducts the electricity for a wide-range of nascent products; and Potash is one of the main fertilizers that can be mined and produced throughout areas of the world and that do not need to be combined with natural gas.
In BHP’s 2022 economic and commodity outlook report it was stated clearly that: “Longer–term, we see potash as a future–facing commodity with attractive fundamentals. Demand for potash stands to benefit from the intersection of a number of global megatrends: rising population,changing diets and the need for the sustainable intensification of agriculture.”
This reveals the essence of BHP’s push to lead in the future facing commodities space.
Potash production forms a vital source of fertilizer for food production and agriculture products all over the world, which is also a completely new segment for the world’s largest metal miner to undertake. With the global mega-trends listed above, it’s not hard to tell that BHP Group’s strategy to search for future facing commodities is a redefining concept about industry and environment — hence, the focal point of the company’s sustainablity strategy.
Moreover, as a result of what was announced by the Biden Administration on April 1, 2022, the Defense Production Act (DPA) and critical minerals supply in the United States is likely to become a politicized issue that will impact the trajectory of mining and sustainability trends. For instance, the United States’ Coalition for a Prosperous America (CPA) published a story about Revere Copper’s renewed investments into original sources of copper, nickel and other critical materials.
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