COLUMN-Glencore’s Glasenberg, live and unplugged – by John Kemp ( – February 26, 2013)

Feb 26 (Reuters) – “What we’ve got to do, when the markets do get stronger, no need to keep building a new asset and let’s keep the market tight for a while,” Glencore Chief Executive Ivan Glasenberg said in remarks about overinvestment in the mining industry.

Glasenberg’s comments underlined the case for vigilant antitrust enforcement in the mining sector.

“Not that we’re here to create an anti-competitive nature, but we’ve got to get returns. You the investors want to get returns on our assets and it’s easily done if we just use our brains,” the Glencore chief told investors at the BMO Capital Markets conference in Florida, reported by Bloomberg.

“We’ve always been wanting to keep building and keep putting the cash which we generate into new assets. That’s what we’ve got to stop doing as a mining industry. We’ve got to learn about demand and supply,” he said.

Glasenberg was criticising departing chief executives at BHP Billiton, Rio Tinto and Anglo American for reacting to higher prices by investing in too much new capacity (“Glencore’s CEO says rival mining chiefs really screwed up” Feb 26).

But his frank observations about the nature of mining profitability confirm the need for heightened scrutiny of asset purchases and mergers and acquisitions activity in the industry.

Given entry barriers, the incentives facing mining bosses and their intentions are crucial.

As the Glencore chief’s comments show, there may be incentives to enjoy the benefit of limited supplies and strong demand in the form of higher prices, rather than respond by rushing to order new capacity.

Regulators should be on guard. The sector is already very concentrated. Further increases in concentration should be resisted and the industry’s conduct should be subject to the strictest form of scrutiny to ensure it continues to operate competitively in the interests of customers as well as shareholders.


Regulators have not always appeared to take potential problems as seriously as they should. In 2008, the Australian Competition and Consumer Commission (ACCC) decided not to object to BHP Billiton’s proposed acquisition of Rio Tinto because “the acquisition would not be likely to substantially lessen competition in any relevant market.”

“The proposed acquisition would combine two of the three major global seaborne suppliers of iron ore lump and iron ore fines,” ACCC observed.

Yet “while barriers to market entry are high, involving significant sunk costs, market inquiries indicated there has recently been significant new entry and expansion in response to high demand for iron ore.”

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