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Glencore PLC is closing its Mutanda mine in Congo, one of its largest copper and cobalt mines. Cobalt hit a peak of near $40 a pound in late 2017 and is now trading at around $12.50 a pound as trade war between U.S. and China hit commodity prices.

Mutanda Mine

Mutanda Mine

Glencore is one of the world's largest producers of cobalt amd Maquarie Bank estimates the closure will take off 20% of the world market's cobalt supply and around 0.5% of the copper market. Many bankers have pushed the revolution in electric vehicles as immediate, Tesla being the poster child. However revolution takes time as Glencore share price is reflecting. 

Cobalt is a key ingredient in the lithium-ion batteries that power the cars. Current demand is for the cobalt-heavy consumer electronics like lap tops, phones and tablets has also fallen off with the weaker global economy. Supply in expectation of greater demand was increased magnifying the proble. Cobalt prices have fallen 58% in the first half of 2019 compared with the same period last year.

Glencore said it would suspend operations at its Mutanda mine in the Congo by the end of 2019 due to a slump in cobalt prices. The global economic outlook "is affecting sentiment in the market, there is no doubt about it," Glencore Chief Executive Ivan Glasenberg said Wednesday at the Q2 earnings conference call.

Since U.S. increased tariffs on Chinese goods industrial metals like copper, which fell 11% in the first half over the same period last year. Glencore back in February that it would curb production at the Mutanda mine as it explored new copper-mining methods for the facility.

Glencore on Wednesday said djusted earnings before interest, taxes, depreciation and amortization for the six months ended June 30 fell to $5.58 billion from $8.18 billion compared with the year earlier. Glencore said net profit for the first half of the year fell 92% to $226 million.

Glencore said the fall in profit was largely due to lower commodity prices and impairments across its portfolio. Revenue fell to $107.1 billion, from $108.6 billion in the first half of 2018,

The company's African copper operations were particularly hard hit, amid higher costs and the fall in copper. Glencore also is battling a rift with the Democratic Republic of Congo over a new mining code and mine invasions by illegal miners which left more than 40 dead earlier this year.

Glencore temporarily suspended mining operations at its majority-owned Katanga Mining Ltd. in Congo in 2016 following a sharp downturn in copper prices. That move caused copper prices to rift higher. The company launched a review in April to look at improving operations and said full-year output of copper and cobalt was expected to be less than the previous guidance of 285,000 tons and 26,000 tons respectively.

Glencore said it now expects production at Katanga in 2019 of 235,000 tons of copper and 14,000 tons of cobalt. Mr. Glasenberg said that while sentiment has deteriorated, demand for metals, particularly from China, hasn't. He added  low inventory levels of key metals should help support prices.

From The TradersCommodity Research Desk

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