Glencore’s metals and minerals division’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) fell by 41% to $5.4 billion in 2023, compared with 2022.
The weaker performance of metals contributed to a 50% fall in adjusted EBITDA across Glencore, whose coal profits also fell in 2023, compared with the previous year.
Lower cobalt, nickel and zinc prices
The drop in profitability was caused by lower prices for cobalt, nickel and zinc in 2023, compared with the previous year.
Changing preference in battery chemistry toward lithium iron phosphate (LFP) batteries and away from nickel cobalt manganese (NCM) batteries was part of the reason for the oversupply and weak demand for cobalt in 2023.
Fastmarkets’ daily assessment of cobalt mixed hydroxide precipitate payable indicator, % cobalt metal standard grade in-whs Rotterdam, cif China, Japan, and South Korea was 48-50% on Wednesday, unchanged since December 22.
Nickel prices on the London Metal Exchange also came under downward pressure throughout the year, falling to $16,250 per tonne on December 29 from $31,150 per tonne on January 3, 2023 – a drop of over 47%.
In 2023, new Indonesian production of mixed hydroxide precipitate (MHP) – which can substitute nickel briquettes or cathodes in battery production – pushed down nickel prices. That has forced nickel operations elsewhere to close.
“We continue to forecast a bear rally in the near term – potentially approaching the $20,000 per tonne level at most this quarter – fueled by short-covering as the cutbacks narrative gains traction,” Fastmarkets analyst Andy Cole said.
“Beyond that, oversupply should re-exert itself and weigh on prices and sentiment again,” he added.
Uncontrolled costs
Cost inflation has hit miners across the base metals complex in recent years, with energy and wage costs increasing following the pandemic.
That cost inflation is evident at Glencore.
Costs were up at Glencore’s copper mines, which produced at an average cost of $1.63 per lb of copper in 2023 – $0.83 per lb higher than in 2022.
Part of that higher cost was due to Glencore’s copper mines making less from by-products, such as cobalt. By-product credits were down by $0.50 per lb in 2023 compared with the previous year.
Glencore’s nickel costs were also up, with production costs at $8.71 per lb in 2023, a $2.40 per lb increase from 2022.
One reason for the increase in nickel production costs was capex at the loss-making Koniambo mine, which Glencore announced plans to sell on February 12.
Zinc was the only base metal that reduced costs in 2023. Glencore produced the galvanizing metal at $0.49 per lb in 2023, $0.11 per lb less than in 2022.
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