Glencore PLC on Friday raised the price and cost guidance for its coal operations and said the trading business is set to achieve its long-term annual earnings target in the first six months of this year.
The commodity mining and trading giant GLEN, +3.63% said that “unprecedented dislocation” in energy markets has resulted in record pricing differentials between coal benchmarks and quality categories.
As a result of these larger differentials, Glencore has increased the mix adjustment guidance for its coal portfolio for the first half to $82-$86 a metric ton relative to an expected Newcastle thermal coal pricing benchmark of $318 a ton. This compares with previous 2022 guidance of $32.80, based on a Newcastle price of $175.
The company’s mix adjustment guidance is a discount used to calculate the realized price for its overall coal portfolio, as a deduction against the Newcastle price. Glencore has coal mines in three countries with various quality types.
In line with higher prices, Glencore is also increasing first half cost expectations for its coal operations to $75-$78 a ton, up from previous 2022 guidance of $59.30 a ton. This reflects higher government royalties and input costs for diesel, explosives, logistics and electricity.
RBC’s mining analyst Tyler Broda said this update should lead to upgrades to consensus expectations, as the benchmark Newcastle price is higher than expected by the market.
Glencore’s coal mines generated adjusted earnings before interest and tax of $3.06 billion in 2021, contributing to the group’s total of $14.50 billion.
In addition, the company said its marketing segment–Glencore’s trading business–is expected to deliver half-year adjusted Ebit of more than $3.2 billion. This is the top end of the company’s long-term annual guidance for the marketing arm of $2.2 billion to $3.2 billion. In the whole of 2021, the division generated adjusted Ebit of $3.7 billion.
“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,” Glencore said.
Shares at 0722 GMT were up 1.2% at 469.70 pence.
Write to Jaime Llinares Taboada at jaime.llinares@wsj.com; @JaimeLlinaresT