GLENCORE reported a steep drop in first-half profit and slashed returns to its shareholders as disappointing Chinese demand weighs on commodity prices, while the volatility that its traders thrive on has eased dramatically since last year.

Glencore reported first-half core earnings of US$9.4 billion, half the record number it posted a year ago, though still one of its best-ever performances. The commodity trader and miner saw profits soar last year as Russia’s invasion of Ukraine sent energy prices to records and dislocated global trade flows, but many of those pressures have now eased, while a sputtering economic recovery in top consumer China has hurt prices, knocking profitability across the mining sector.

The company’s sprawling commodity trading business also reported a sharp drop in first half earnings, in the latest sign that the blockbuster returns seen across the industry last year have begun to fade. Its trading profit of US$1.8 billion was down 52 per cent year-on-year, but still above the US$1.1 billion to US$1.6 billion per half year that Glencore aims for.

“Following 2022, a year characterised by extreme global geopolitical and economic turbulence, generating extraordinary energy market dislocation, volatility, supply disruption and record prices for many coal and gas benchmarks, 2023 has, for the most part, seen energy trade flows rebalance and normalise,” chief executive officer Gary Nagle said in a statement.

Glencore said it would top up its dividend by US$1 billion and buy back a further US$1.2 billion of its own stock – also sharply lower than a year earlier, in part because the company says it’s holding back cash while it bids to buy Teck Resources Ltd.’s coal business.

The two companies spent much of this year in a bruising fight after Teck publicly and repeatedly rejected a takeover offer from Glencore, which said it wanted to create two new, more specialised companies from their combined coal and metals businesses respectively.

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The latest twist in the saga came in June, when Glencore proposed buying Teck’s steelmaking coal business for about US$8 billion as an alternative to its full takeover bid. The company is holding back US$2 billion in cash in case it is successful in the bid, Glencore said on Tuesday (Aug 8).

At its own mines, Glencore said profit was hurt by lower prices for coal and cobalt in particular, as well as cost inflation around the world and lower production levels at some operations. BLOOMBERG