Glencore’s senior management team arrived in London on Tuesday September 10 to show investors how it is turning its Xstrata assets into leaner, meaner operations that create maximum value from every tonne they mine, smelt and refine.

For investors, the important take-away will be that margins for core products like copper, zinc and coal should widen under Glencore’s watch.

But as the head of zinc marketing Daniel Maté explained, the company is leaving no stone unturned in its search for value, and from now on all byproduct sales will be taken out of the hands of Xstrata plant managers, and managed directly by Glencore traders in Baar.

Under Xstrata’s ‘sub-optimal’ approach, by-product sales were handled locally at the asset level, and managers took a passive approach to product mix, selling stock as and when they needed more working capital or storage space, Maté said.

“Before they were sold by the site ... because it was not considered a core business. What we’ve done is put that in what has always been the Glencore model.”

“There is money to be made managing all the byproducts under one book. We have always treated assets and trading as one because this is how you make money out of commodities like zinc or lead ... It’s the same on the byproducts,” Maté said.

That new approach will please investors, but it could cause a headache for minor metals traders and processors who have swept up the money that Xstrata’s ‘sub-optimal’ approach sometimes left on the table.

“As if it wasn’t hard enough to make money in these markets, now we’ve got to worry about Glencore sniffing around in cadmium or selenium? Brilliant,” one minor metals trader told Hotline.

Mark Burton
Twitter: @mburtonmb