Glencore debt crisis fermentation busy self-help
Affected debt and copper prices and other factors, had fame mining giant Glencore early December once again usher in a stock price plummeted, the 9th shares tumbled 9 points. 10 morning Glencore announced stock brief suspension.
Winter commodities, international oil prices recently plunged 6%, to refresh the nearly 7-year low; while copper fell to its lowest level in 10 years.
Affected debt and copper prices and other factors, had the fame of the mining giant Glencore early December once again usher in a stock price plummeted, the 9th shares tumbled 9 points. 10 morning Glencore announced stock brief suspension.
Late afternoon on the 10th, Glencore published in the official website of the company's latest debt reduction plan. Glencore will accelerate debt and capital spending cuts, debt reduction target in September and then raised $ 3 billion, to be at the end of next net debt fell to $ 18 billion. 2016 capital spending cut by $ 5 billion to $ 3.8 billion.
Debt reduction target and then raised $ 3,000,000,000
Second plunge in the stock price and debt default risk high when the mouth, Glencore will share a brief suspension, announced a new debt reduction plan.
Glencore CEO Ivan Glasenberg said, "In September, we announced a series of measures to reduce debt, and achieved significant progress so far has completed approximately $ 8.7 billion reduction plan."
In this latest statement, Glencore said it would base billions (USD) debt reduction plan in September, continue to raise the debt reduction target for the end of next year to cut its net debt to 18 billion to 19 billion US dollars of Rooms, while capital spending will be further reduced from the earlier estimate of $ 5 billion to $ 3.8 billion.
Ivan Glasenberg said, "Glencore is ready, the downturn in commodity prices environment, create more cash flow. We always maintain a high degree of flexibility, and will continue to assess the need to take greater Debt reduction efforts action. "
In an interview with 21st Century Business Herald reporter, "My steel net" analyst Xu Xiangchun fate of Glencore expressed great concern. Xu Xiangchun said this week the stock plunged, is the second crash, investor confidence now Glencore has been difficult to recover.
"Mining winter this environment, the price of copper has dropped to 7-year low, copper consuming nations of China's economic slowdown, sluggish demand for copper products, copper prices may also be lower. Nobody knows Mining winter will continue for several years, Mining giant destined to live a few years, but also bitterness. "said Xu Xiangchun, then, Glencore will probably continue to face the risk of a debt default or even bankruptcy, unless commodity prices can rise sharply in the coming months time .
Copper prices plummeted involvement
Glencore but a large integrated mining enterprises, 2015 Fortune Global 500 companies ranked No. 10 ranking.
Glencore currently has three major business segments - metals and minerals, energy products, agricultural products, three plates of revenue contribution rate of 59%, 29% and 12%, respectively. The contribution of the largest metal minerals, copper, nickel, zinc, respectively, contributed 36% of the performance of 2014, 7% and 5%. Can also be seen from the data, the impact of copper products Glencore's performance is very large.
Since the first half of this year, with the slowdown in global demand and excess supply, commodity prices generally decline. Copper prices stumble endlessly for several months. August 19, 24, London Metal Exchange (LME) copper prices the lowest on record repeatedly refresh since 2009, the minimum to $ 4,855 / ton.
Involvement in copper prices plummeted, Glencore's performance also fell sharply. According to its 2015 report shows that the first half of this year, Glencore business recorded a net loss of $ 676 million, while last year the net profit of $ 1.72 billion; $ 85.7 billion in the first half revenues, but also to drop 25 percent over last year.
Sharp drop in performance at the same time, due to the previous years of aggressive acquisition of upstream mining assets, Glencore's net debt reached $ 30 billion. While Merrill Lynch in a research reported in October, Glencore involved in all financial institutions of exposure could reach $ 100 billion. Previously, Glencore top face debt pressure, was forced to announce the sale of assets will take, copper production, suspend dividend and raising $ 2.5 billion set by a number of measures "Brokeback to survive."
But clearly, Glencore and not really resolve the risk of debt default. Hai Tong Securities research report data show that the debt pressure Glencore concentrated in 2015 and 2016, totaling $ 32.1 billion. The net cash inflow in 2015 was only the first half of $ 238 million, the market increasingly worried about whether the company has the ability to repay its debts.
At the same time, the debt default risk Glencore also soared. As of the evening of 9, Glencore credit default swaps (CDS) prices surged to 900 basis points or more, which they will achieve its default risk 54%, the highest level in six years.
Expert: Domestic steel prices are also facing debt default risk
Glencore dilemma facing not isolated cases. In China, by ore prices, sluggish demand and falling steel prices and other factors, the domestic mining and steel companies also faced with overcapacity, falling commodity prices, sluggish demand and capital chain tension and other business dilemma.
China Iron and Steel Association (CISA) statistics show that from January to October this year, the national medium-sized steel enterprises accumulated losses of 38.638 billion yuan, of which the main steel business losses of 72 billion yuan, 101 medium-sized steel enterprises in 48 loss, the loss widened to 47.5%, another new high this year losses. The loss-making steel in key areas in Hebei's steel industry as much as 60 percent.
In fact, the steel industry can be seen as a microcosm of China's industrial transformation and upgrading of the manufacturing sector. Economic slowdown, steel consumption growth in areas such as real estate infrastructure are gradually slowing, while supply is still excess capacity. Similarly there are cement, glass, nonferrous metals, coal and other industries.
Xu Xiangchun said with such foreign Glencore is different, the domestic iron and steel, mining enterprises, mostly state-owned enterprises, there is the economic pillar of the local business, it is difficult to easily layoffs, shut down or even bankruptcy. In this context, even into the loss-making companies are also struggling to adhere to the production, "because once discontinued lost share, everybody wants to hold on, not to be eliminated." In addition, these companies have to face bank loan pumping pressure . Scission cash flow risk has become suspended in the steel and mining enterprises overhead sword of Damocles.
Steel Association Deputy Secretary-General, Metallurgical Industry Planning Research Institute start-Lee earlier in the 11th Bohai Steel Market Forum, said the steel industry is now the biggest problem is the debt problem, the industry average debt ratio up to 70% higher than the 56.5% of the Asian financial crisis of the steel industry in difficult times dozen percentage points, and the high cost of capital, it is also higher than the level of 55.7 percent of China's manufacturing industry.
Li Chong said, from one hundred Steel Association statistics and medium-sized steel enterprises, the total debt of about 3.3 trillion yuan, of which 1.35 trillion yuan of bank loans, in addition to 2 trillion yuan of bank loans is a disguised form of funds and other source. Especially in the winter market commodities, corporate accounts receivable and accounts payable have increased dramatically, iron and steel enterprises are very tight financial chain. In addition, in December or annual node bank repayment, repayment pressure mills facing steep, or the presence of a group of mills default risk.
China Metallurgical Industry Planning Research Institute, Dec. 7 also released the Chinese and global steel demand forecast. The report predicts that steel demand this year and next year and crude steel production has dropped from the peak, and this year the demand for and consumption of crude steel is the first time a substantial reduction in the transition years, the steel industry will enter this reduction cycle.
2015 Chinese steel demand fell 4.8 percent to 668 million tons, year of iron ore (equivalent to grade 62%) demand decreased slightly by 0.4% to 1.12 billion tons, dependence on foreign iron ore will reach 79.5%; 2015 crude steel production is expected to decline by 2.1% year on year to 806 million tons, next year will fall to 781 million tons. The report also predicts that in 2016 China's steel demand will also continue to be reduced to 648 million tons of iron ore demand will continue to decline over the same period to 1.073 billion tons.
Lee gave a presentation on the new record, in 2015 China's steel industry has reached a turning point, began to enter the reduction of growth period. Chinese steel demand and production continued the downward trend is irreversible in the future, is expected in 2030 China's steel demand will fall to 490 million tons.
Li Chong believes that this big pattern change will bring many changes in China's iron and steel industry. Future, shutting down bankrupt steel companies will increase, related upstream and downstream enterprises, especially for the steel industry, coal industry and service the iron ore industry, will face enormous challenges.
Xu Xiangchun analysis, China's iron and steel, mining companies debt burden, capital chain tension, but it is difficult to shut down, bankrupt. On the one hand is one of many steel companies employees, number of employees, a large state-owned steel enterprises may have tens of thousands or even hundreds of people, bankruptcy will bring staffing difficulties.