Glencore Up as it Adds to Metals Empire
NEW YORK (TheStreet) -- Glencore's (GLEN.L: LSE) quarterly results are out and they weren't very good, showing an adjusted EBITDA drop of 17%.
But guess what? The shares rallied almost 6% today. That's because the miner and trading firm is nearing the final clearance from the Chinese government to merge with miner Xstrata (XTA.L: LSE), a deal that has been twice postponed but will launch Glencore to becoming the fourth-largest miner of global base metals.
And it is not their size as a miner that is significant. It is their continuing quest to swallow up mining assets that is most significant, driving their trading and marketing arms. While being only the fourth-largest miner, their prominence in derivative trading is hardly so humble -- already 70% of global zinc trade and more than 50% of global copper trade crosses their desks.
It's that kind of financial dominance that drives the continued acquisition of physical assets. Understanding and managing the physical flow of base metals including zinc, copper, alumina and lead as well as much of the coal and oil trade allows a marketing arm to have a great advantage in crafting and profitably trading the financial commodity markets. It is a complex profit model, but in short, Glencore is working to create an OPEC-like cartel in global base metal trade.
See my video above for more about the monster that Glencore is slowing becoming.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.