Glencore (OTC:GLNCY) Reconsiders Business in Russia After Ukraine Invasion, Initiates Review

Glencore company headquarters building in Zug, Switzerland.

Glencore (OTC:GLNCY), the world’s largest commodity trader and miner, is reconsidering its business activities in Russia following the Russian invasion of Ukraine. 

Among the activities under review is Glencore’s shareholding in the Russian hydroelectric and aluminum group En+Group, which has an annual production capacity of 3.9 million tons and is controlled by United Co. Rusal International PJSC, and about 0.5% of Rosneft.

This move by Glencore came after a variety of Western companies linked to Russian companies announced to cut ties with the country following Russia’s invasion of Ukraine. This due to pressure from governments and shareholders following the invasion. 

The Swiss-based trader is also a major trader of aluminum maker Rusal’s metal and also trades some other Russian commodities including its oil. Glencore currently holds a 10.55% stake in En+Group, Rusal’s majority shareholder, and also owns a small 1% stake in oil major Rosneft. 

In 2020 Rusal announced an agreement to sell aluminum to Glencore for US$16 billion which benefited the company by selling a third of its production to the trader. The deal was originally to run until 2024 with an option to extend it to 2025, Rusal stated at the time. 

As already mentioned Glencore was also buying oil from Rosneft although the volume figure has not been disclosed.

Glencore at the end of 2021 announced in a press release the results of the value of these shares which were US$789 million and US$485 respectively.

Glencore in a press release stated, “We have no operating footprint in Russia and our trading exposure is not material to Glencore. “We are reviewing all our business activities in the country, including our shareholdings in En+ and Rosneft.”

Glencore also stated that it condemned the Russian government’s actions against the people of Ukraine and said, “The human impact of this conflict is devastating. Glencore is looking to see how we can best support humanitarian efforts for the people of Ukraine.”

The aluminum market has also been affected by Glencore’s decision as shipper AP Moller-Maersk A/S said it has halted ship bookings to and from Russia which increases supply turmoil for buyers already suffering the ravages of shortages. 

Glencore’s business review also marks a radical shift in Glencore and Russia’s relationship as former Glencore CEO Ivan Glasenberg, received Russia’s Order of Friendship from President Vladimir Putin in 2017 in recognition of the company’s role in the privatization of Rosneft. 

With the current destabilization of the Russian economy, mining companies are quickly rethinking their strategies, with many of them pulling out of the country entirely for the time being. Others will be able to operate for now, but may be weighing the risks of the unstable, unpredictable situation before making further decisions. 

 

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

By Matthew Evanoff

I cover the mining industry and the best mining stocks around the world. I write about industry news, individual companies, projects, management, and profiles on industry leaders.

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