Glencore industrial coal portfolio produces various quality specifications in three countries, destined primarily for seaborne thermal markets, but also for steel and domestic consumption. Glencore have seen unprecedented dislocation in energy markets over the year to date, resulting, at times, in record pricing differentials between the various coal benchmarks and quality categories.
Relative to the Newcastle thermal coal pricing benchmark, Glencore coal portfolio mix adjustment guidance (which is used to calculate an overall realised price for the Group’s coal portfolio as a deduction against the Newcastle thermal coal price ) has increased to reflect these larger differentials and portfolio composition.
Glencore February 2022 full year portfolio mix adjustment guidance(1) of $32.8 per tonne (basis a Newcastle thermal coal forward average price at the time of $175/t) is expected to increase to a range of c.$82 to $86 per tonne for the first half of 2022, basis an assumed Newcastle thermal coal average benchmark price of $318/t over the half (May YTD plus June forecast).
In line with the higher coal prices, government royalties have increased significantly relative to its February cost expectations, which together with higher input costs (including diesel, explosives, logistics and electricity), are expected to result in an increase in Glencore reported average FOB thermal unit cost for the period to c.$75-$78 per tonne, compared to earlier guidance of $59.3/t for 2022.
Glencore marketing business has successfully navigated the extraordinary global challenges faced during the period, being a source of continuous and reliable commodity supply to our vast customer base.
Against this challenging and elevated risk backdrop, Marketing segment’s financial performance has continued to be supported by periods of heightened to extreme levels of market volatility, supply disruption and tight physical market conditions, particularly relating to global energy markets.
Tracking YTD performance, Glencore expect its Marketing segment’s half-year adjusted EBIT to exceed $3.2bn (the top end of our long-term, through the cycle, Adjusted EBIT annual guidance range of $2.2-3.2bn). Glencore currently expect more normal market conditions to prevail in the second half of the year.