Glencore Looks For Canadian Operational Efficiency As Zinc Competition Stiffens - BOLIDEN AB UNSP/ADR by

Anglo-Swiss diversified mining giant Glencore (OTCPK: GLCNF) is pursuing further consolidation of its copper and zinc assets. After job cuts, a $1.5 billion impairment, and a pause of its smelting operation in the Philippines, the company is looking to implement efficiency measures for its Canadian operations.

"Our smelting and refining business continues to be under a high level of economic pressure due to challenging market conditions that have led to historically low treatment charges," Glencore's head of zinc assets, Suresh Vadnagra, said in the internal memo, according to Bloomberg's report.

The assets in focus include CEZinc, Horne copper smelter, and Canadian Copper Refinery. CEZinc, North America's second-largest zinc plant, benefits from low energy costs and proximity to U.S. markets. Still, rising competition for feedstock has squeezed the margins. The firm laid off 85 employees in Montreal last December but might need further cost reductions and operational synergies to sustain profitability.

Zinc is the fourth most widely used metal. It is irreplaceable for galvanizing steel and preventing corrosion, thus critical for construction, automotive production, and renewable energy. It is also an element in agriculture, as many soils worldwide lack sufficient zinc, affecting food production.

Yet, after its price peaked in early 2022, the market saw a sharp decline despite declining production and tightening supply. The International Lead and Zinc Study Group noted that mined zinc fell for the third consecutive year in 2024, with key regions like China, Canada, and Peru experiencing reduced output. The future outlook is that production at the Alaskan Red Dog Mine, which accounts for 10% of global supply, will slow down owing to ore depletion.

The supply constriction helped the recovery, driving the prices to $2,950 per ton in March, the highest in nearly two months. The market flipped to a deficit of 62,000 tons in 2024 from a surplus of 310,000 tons the previous year, as Chinese refined output fell by 7%.

Competition in the smelting sector has intensified, prompting concerns about Glencore's profitability. Scandinavian mining leader Boliden (OTCPK: BDNNY) inaugurated the expanded Odda zinc smelter in Norway, boosting its production capacity to 350,000 tons annually, making it Europe's second-largest and the world's most productive zinc smelter. The expansion involved significant infrastructure upgrades, including a new roasting furnace, sulfuric acid plant, and modernized leaching and cleaning facilities.

Due to U.S. trade policies, Glencore will unlikely remain the sole re-evaluator of Canadian assets. Earlier this month, President Donald Trump briefly imposed 25% tariffs on most Canadian and Mexican goods before exempting those covered under the North American free trade agreement until April 2.

Any additional tariffs on Canadian metal exports would further complicate Glencore's ability to sell its products in one of its largest markets.

Price Watch: SPDR S&P North American Natural Resources ETF (NYSE:NANR) is up 5.78% year-to-date.

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