Glencore's 14% Profit Decline and Strategic Resilience in a Volatile Commodity Market

In the first half of 2025, Glencore reported a 14% year-on-year decline in adjusted EBITDA, falling to $5.43 billion, a result that underscores the volatility of the global commodities market. This decline, driven by weak coal prices and operational challenges in its copper division, has raised questions about the company's long-term resilience. However, a closer examination of Glencore's strategic initiatives and undervalued assets reveals a compelling case for investors willing to look beyond near-term turbulence.

Navigating Near-Term Headwinds

Glencore's H1 2025 results were marred by a $655 million net loss, exacerbated by a $900 million impairment charge from its Colombian coal operations. The drop in coal prices—steelmaking coal at $167.1/ton versus $274.2/ton in H1 2024—reflected broader market normalization after years of pandemic-driven surges. Meanwhile, copper production fell 26% due to lower grades and water constraints, though cobalt and zinc output rose, driven by higher grades at the DRC's Mutanda mine and improved efficiency at Antamina.

Despite these challenges, CEO Gary Nagle has signaled optimism for H2 2025, citing the resolution of operational bottlenecks in copper and a $1 billion cost-cutting initiative. These measures, coupled with a $1 billion share buyback, aim to stabilize cash flows and improve margins. The company's revised EBIT guidance of $2.3–$3.5 billion annually by 2026 further reinforces its focus on operational discipline.

Strategic Resilience in a Shifting Landscape

Glencore's long-term positioning hinges on its ability to balance legacy coal assets with high-growth transition metals. While energy coal production declined 7% in Q1 2025, the company has strategically reduced output at Cerrejón and Australian mines to align with market rebalancing. This proactive approach contrasts with peers who remain overexposed to a sector facing regulatory and ESG headwinds.

The company's pivot toward copper and cobalt—critical for renewable energy and electric vehicles—positions it to capitalize on decarbonization trends. Copper equivalent production rose 5% in H1 2025, driven by the acquisition of Elk Valley Resources (EVR), which boosted steelmaking coal output by 362%. Meanwhile, cobalt production increased 19% to 18,900 tonnes, reflecting higher grades at Mutanda. These metrics highlight Glencore's dual strategy: leveraging coal's niche role in hydrogen-based steelmaking while scaling transition metals.

Undervalued Opportunities in the Portfolio

Analysts from Deutsche Bank and Jefferies argue that Glencore remains in “deep value territory,” with a target price of 380p–400p, despite a 20% recovery from April 2025 lows. This undervaluation stems from short-term coal-related concerns and underappreciated strengths in its diversified portfolio:

1. Zinc: A Surplus Market with Cost Advantages
   Glencore's zinc production rose 12% to 465,200 tonnes in H1 2025, with unit cash costs plummeting to 2.3 cents/lb from 33.3 cents/lb in 2024. While the global zinc market faces a 93,000-ton surplus in 2025, Glencore's cost efficiency and production flexibility position it to outperform peers. The company's full-year zinc guidance of 940,000–980,000 tonnes suggests it is well-placed to navigate the surplus and benefit from demand stabilization in construction and manufacturing.

2. Copper: A Transition Metal with Long-Term Tailwinds
   Copper's role in the energy transition ensures robust demand, even as Glencore grapples with short-term operational challenges. The company's $1 billion cost-cutting plan and anticipated H2 recovery in copper production could unlock value, particularly as global demand for EVs and grid infrastructure accelerates.

3. Steelmaking Coal: A Niche but Strategic Asset
   While energy coal faces declining demand, steelmaking coal remains a strategic asset for hydrogen-based decarbonization in the steel industry. Glencore's EVR acquisition, which operates until the 2060s, provides a long-term hedge against energy coal's decline.

Risks and Considerations

Investors must weigh Glencore's coal legacy against its transition-metal ambitions. The company's Climate Action Transition Plan (CATP) targets a 25% reduction in industrial emissions by 2030, but its continued coal expansion raises ESG concerns. Regulatory risks, such as EU carbon pricing and U.S. tariff policies, could further pressure margins.

Investment Thesis

Glencore's strategic resilience lies in its ability to adapt to market cycles while capitalizing on the energy transition. For investors, the key is to leverage its undervalued transition-metal assets (copper, cobalt, zinc) while hedging against coal-related risks. The company's cost discipline, share buyback program, and operational improvements in H2 2025 present a compelling risk-reward profile.

Actionable Advice:
- Buy for the long term: Position in Glencore's copper and cobalt segments, which align with decarbonization trends.
- Monitor coal exposure: Closely track regulatory developments and the company's ESG progress.
- Consider a demerger: If Glencore's coal and ferroalloys segments are spun off, the re-rating potential could unlock significant shareholder value.

In a market where volatility is the norm, Glencore's diversified portfolio and strategic agility offer a rare combination of resilience and growth potential. For investors with a multi-year horizon, the current valuation represents an opportunity to participate in a company poised to navigate the dual forces of decarbonization and commodity cycles.
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