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Glencore Is Top Codelco Customer as Copper-Trading Reach Expands

Glencore Is Top Codelco Customer as Copper-Trading Reach Expands

(Bloomberg) -- For evidence of Glencore Plc’s growing heft in the global copper market, look no further than the customer list of No. 1 miner Codelco.

The commodities giant was easily Codelco’s biggest buyer last year, according to a Bloomberg analysis of data from the Chilean state copper producer. Codelco is a prized relationship among traders as it sells in large volumes and its copper is in high demand among buyers in key markets like China and Japan.

Five years ago, Glencore didn’t even rank among Codelco’s top 10 clients. The data, which show that Glencore accounted for more than a tenth of Codelco’s sales last year, highlight how the miner and trader has expanded its already market-leading position in the copper market since it bought Xstrata Plc in 2013.

Glencore Is Top Codelco Customer as Copper-Trading Reach Expands

Glencore has doubled its copper-trading volumes in the past six years, to 4.5 million tons in 2018. In recent years, the company has aggressively pushed into the Chinese market, according to traders, challenging rivals such as Red Kite and Trafigura Group Ltd. It also buys significant volumes of copper concentrates from Codelco for its own smelting operations.

"Glencore’s copper strategy hinges on the assumption that copper‘s demand is bound to increase significantly," said Jean-Francois Lambert, a former commodity trade finance banker at HSBC Holdings Plc and industry consultant. "A supply shortage is in the making against this backdrop."

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By 2018, Glencore’s purchases from Codelco accounted for 11 percent of the Chilean company’s total revenue, with its Swiss and Chilean units together accounting for $1.56 billion of Codelco’s sales.

"Glencore is the world’s largest smelting company, with 1.3 million tons of refined copper, and is a client of Codelco in the commercialization of non-refined copper," a Codelco official said in an emailed response to questions, declining to explain further the increase in sales to Glencore. A Glencore spokesman declined to comment.

Glencore Is Top Codelco Customer as Copper-Trading Reach Expands

Last year, Codelco started signing contracts with clients that included special conditions giving the state-owned miner flexibility to deliver refined copper, concentrate or blisters. In December, Codelco’s refining capacity was cut after the company had to shut two of its four smelters due to delays to upgrade them to comply with tougher environmental rules. The smelters at the Chuquicamata and Salvador mines remain halted and are expected to resume operations within the next few weeks.

The growth of Glencore’s copper trading comes as the commodity giant undergoes a change of leadership in its copper division. Telis Mistakidis, one of the company’s top shareholders who had led copper trading since 2002, retired at the end of last year, with Nico Paraskevas taking over the unit.

"What was seen as a major leadership shake-up when Telis left may not prove so disruptive, after all," said Lambert.

--With assistance from Mark Burton.

To contact the reporters on this story: Jack Farchy in London at jfarchy@bloomberg.net;Laura Millan Lombrana in Santiago at lmillan4@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Liezel Hill, Dylan Griffiths

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