GLENCORE/ SHELL and other current affairs related dilemma
Hi,
I was just wondering why a good trading company would like to take assets on its book for a very long time. Glencore appears to have shot itself in the foot by acquiring mining and mineral business. Why did a mineral trading platform ever think that it can own mines and sell minerals?
Consultants are supposedly good at Industrial domains attached but are they fit to run the industries as well? Can an energy/ oil and gas partner/ director of McKinsey become the best future CEO Shell has ever had? (The USD7bn failure at arctic)
Should the consultants/ mineral trading platforms/ investment bankers only limit themselves to 'give strategy decks/ risk free trading platforms and scoot' or do they have the skills and willpower to get their hands dirty and take risks (of implementation (McKinsey)/ taking assets on books (Glencore)) as well?
Apologies for the long post.
singhn9
The answer seems fairly obvious to me - if you mine your own minerals as opposed to be acquiring them via an offtake agreement and/or trading desks, you get them at cost. Glencore is actually a pretty efficient operator and Ivan certainly knows what he is doing. It is more a systemic issue than one specific to Glencore
Yup, nailed it. Glencore's problem is its heavy debt load and languishing commodity prices, not its incompetence as an operator as they're actually pretty good at that. Their business model makes sense with its vertical integration and will perform well as the commodity cycle improves, they're just in a pinch now with that debt load. Even outside of that they had a significant ownership in Xstrata before the acquisition / IPO so they've long had exposure to that side of the business.
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