Minews - Glencore CEO Glasenberg attacks Rio, BHP iron expansion

(Minews) - IN his first investor day since buying Xstrata last year, Glencore’s billionaire chief executive Ivan Glasenberg has highlighted his company’s spread of commodities, marketing business and willingness to react to supply and demand fundamentals.

The stronger than usual talking up of his company comes with Glencore banned from pursuing a desired $190 billion merger with Rio Tinto for six months under London’s “put up or shut up” takeover laws.

Mr Glasenberg took aim at the iron ore strategies of Rio and BHP Billiton, saying expanding existing mines — which Rio has recently talked up — could still be negative for the whole business.

He said Glencore would not “cannibalise” its business.

“You may have a great internal rate of return of 30 or 40 per cent but we look at the whole market,” he said.

“You’re putting more supply on the market, which has an effect on price,” he said, adding that this price hit was taken on all production, not just the expansion volumes.
Rio last week said its latest iron ore expansions would have an internal rate of return of 40 per cent.

But the qualities Mr Glasenberg highlighted last night are those he has previously noted distinguish Glencore from Rio, which is heavily exposed to iron ore and which, with BHP, has been continuing to flood the market with low-cost iron ore and drive prices down.

“Capital misallocation, not a lack of demand, remains a key issue for the sector resulting in a clear need to differentiate by commodity,” Mr Glasenberg, who owns 8.4 per cent of his £64bn ($120.7bn) company, said.

The company highlighted what it called an “unparalleled track record of value creation since 1994”.

In presentations in London last week, Rio chief Sam Walsh was able to directly address the Glencore tilt.