What’s Glencore’s Game?

Not so long ago (i.e. just a few weeks), Glencore was leading the cheer squad for zinc. Its corporate acolytes were pitching the “zinc is the strongest metal” argument to retail investors liberally using Glencore’s charts and statistics in their presentations. Now, apparently, a price fall since May is too much to bear and deserving of extreme action. The fall since May needs some perspective. The average Australian dollar price in May was 19% higher than the price on Friday. Such a variation would have a profit impact if sustained but is not a big difference as commodity price fluctuations go. More importantly, the May average was an outlier in recent history. It was the highest monthly average price since 2007. Other than Glencore finding corporate life a tad uncomfortable presently, nothing material has happened to the Australian dollar price (other countries’ experiences may differ) to warrant closure of Australian zinc mines. The chart frames the same question: is there anything in the 35 year history on display that screams “mine closure” now when it was not previously necessary?