Glencore’s pursuit of Rio Tinto has come full circle – by Peter Kerr (Sydney Morning Herald – October 8, 2015)

http://www.smh.com.au/

It was supposed to be the year that advanced Ivan Glasenberg’s plans for global domination of the commodities sector.

But the year since Rio Tinto rebuffed merger overtures from Glasenberg’s Glencore, which was marked on Thursday, has become the South African entrepreneur’s annus horribilis.

Not only did the merger, seen by some as inevitable and by others as unlikely, not come to fruition, but the process prompted the market to compare the two companies thoroughly. That comparison has not flattered Glencore.

The merger approach came amid the peak of the iron ore crisis – prices had fallen by 44 per cent in 12 months, and Glasenberg had whipped up a debate about both Rio Tinto’s reliance on the bulk commodity and its controversial strategy of continuing to expand exports into weak markets.

Glasenberg, on the other hand, portrayed himself as the commodities guru with the better-placed, more-diversified portfolio that had an oil hedge and exposure to the base metals that most predicted would shine in 2015.

But instead commodity price falls gradually unravelled Glasenberg’s arguments over the ensuing 12 months.

The surprise slump in the oil price took the shine off Glencore’s energy advantage over Rio, while prices for nickel, zinc, lead and copper failed to rise as expected, falling instead to lows not seen since the global financial crisis.

Iron ore also continued falling, but by less than in the year before the merger approach was made public, and the high-profile debate Glasenberg created around Rio’s best business ultimately reiterated to most shareholders that Rio was behaving rationally as the world’s lowest-cost producer.

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