Glencore International: A Case Study on Trends and Global Economy

This case study examines Glencore International AG, a major player in the mining and commodity trading industry, analyzing its trends, global position, and the challenges it faces. Founded in 1974, Glencore has grown to become a leading company in the production, marketing, and distribution of energy, agriculture, and metal products. The study highlights Glencore's operations in the Democratic Republic of Congo, where new regulations and disputes with state-owned companies are creating challenges. It also discusses the company's involvement in Investor-State Dispute Settlement (ISDS) cases with Bolivia and Colombia. Furthermore, the case study explores Glencore's revenue generation, market value, and global standing, noting its leading position in cobalt production and significant revenue from Asia and Europe. Recent issues, including legal claims, tax hikes, and investigations into bribery and corruption, are also addressed. Finally, the study touches on Glencore's efforts to diversify its workforce and promote transparent tax policies while navigating incentives on trade deals and regulations to maintain its profitability.

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Glencore International
Student’s name
Institution affiliated
Date

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Introduction
Glencore International AGwas founded in 1974 as Marc Rich +Co AG. It was renamed Glencore
International in 1994 after buyout management(Armstrong, 2016). The company deals with production,
marketing, and distribution of energy, agriculture and metal products(Onstad, MacInnis& Webb, 2011).
The metals and minerals it operates with their production and trading are aluminum, nickel, lead,
alumina, zinc, copper, iron ore, ferroalloys, and cobalt(Armstrong, 2016). On the side of energy
operations, it deals with oil production, gas, coal and coke and value-added materials such as liquefied
petroleum gas, jet fuel, and naphtha(Giurco, McLellan, Franks, Nansai, & Prior, 2014).
The Democratic Republic of Congo is a producer of cobalt and copper poised new
regulationsand taking advantage of the growing demand for the key metals(Volchkov, 2017). The
country is taking the second approach, which is adding the problems Glencore is facing as a larger
mining operator. The country approved legislation that could affect the mining of cobalt which is used in
batteries(Onstad, MacInnis& Webb, 2011). The government made three alterations to the law:
increasing taxes on windfall profits, increasing royalties and removing contract guarantees, and
removing a 10-year waiver on complying with new legislation(Volchkov, 2017). The last two measures
were objected to strongly by the mining industry(Aversano&Ritsatos, 2014). Glencore is at the center of
ongoing disputes(Taylor, Davies, Kristensen&Csavina, 2014). Gecamines, a state-owned company is a
challenge for Glencore. It is also seeking an amicable resolution for its’ nearly $ 10 billion debt of
Kamoto Copper Co.which shut down in 2015 due to the underperformance of the mine(Volchkov, 2017).
Regulators are also investigating the company over accounting practices of Katanga which trades with
the Canadian Toronto stock exchange.
Glencore initiated two Investor-State Dispute Settlement(ISDS) cases. The claims against Bolivia
were about the two smelting plants of tin and antimony. The government of Bolivia claimed that the

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mining rights had been awarded under suspicious means and that it nationalized them in the public
interest. Bolivia has taken several measures to prevent international courts from making decisions that
can be enforced against the country by foreign investors(Taylor, Davies, Kristensen&Csavina, 2014). The
country withdrew from International Centre for Settlement of Investment Disputes (ICSID). In 2015 it
introduced new domestic arbitration framework to keep the proceedings inside the country and subject
to Bolivian law and its authorities, including arbitrations involving foreign investors(Volchkov, 2017).
However, this did not deter Glencore from starting its ISDS case in 2016.
Glencore also sued the government of Colombia after it sought to revoke parts of an amended
agreement signed in 2010 to expand Calenturitas coal mine rin by Glencore’s subsidiary
Prodeco(Barkemeyer, Stringer, Hollins&Josephi, 2015).
Position in the global economy; Glencore is the leading mining company regarding revenue
generation globally. Its revenue has not been purely generated by mining alone, but also by trading
commodities. In market value, the company is ranked fourth among the mining companies(Armstrong,
2016). The company generated 205 billion U.S. dollars revenue back in 2017. Its income is distributed as
follows; energy products lead with 62%,metals and minerals 39% and the rest accounts for agricultural
products. Two-thirds of Glencore’s revenue emanates from Asia and Europe(Forsgren, 2017).
In global standing, Glencore is placed number four of the leading companies in mining in market
capitalization(Forsgren, 2017). It is thefirst among cobalt producers, fourth in copper production and
tenth in platinum production. It is ranked fourteenth among the top revenue-generating companies
worldwide(Forsgren, 2017).
. The company has been facing problem pile up in the Democratic Republic of Congo. Former
Mutanda shareholder is seeking compensation for a 19% stake(Ralston, Hargrave& Dunn, 2017). The
company’s relationship with the country is deteriorating(Ralston, Hargrave& Dunn, 2017). This is after a

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legal claim considered by the company to be dead was brought up(Ralston, Hargrave& Dunn, 2017). The
lawsuit is posing a threat to the company’s control of its prized Congolese mines considering it’s the
third court action this year. The Congolese government has also hiked taxes on
mining(Asongu&Nwachukwu, 2016). Former partner Dan Gertler is also suing the company billions of
dollars over unpaid royalties. Congolese-American businessman Charles Brown is demanding
compensation after his shares were fraudulently sold to Glencore in two transactions, in 2007 and 2012.
Brown’s allegations are posing a greater threat to Glencore and the Congolese government(Volchkov,
2017).
US Justice Department issued a subpoena to Glencore ordering it to produce documents and
other records concerning compliance with the Foreign Corrupt Practices Act (FCPA) and the US money
laundering statutes(Campodónico, 2013, and Asongu&Nwachukwu, 2016). The company is accused of
bribery and corruption(Campodónico, 2013).
Argentine’s soybean crushing and Brazilian sugar milling operations are suffering due to reduced
crop sizes in the regions. Soft-seed crush margins in Europe remain weak. The devaluation of the
Brazilian Real pressured Brazilian wheat milling margins(Ralston, Hargrave& Dunn, 2017).
Glencore is looking forward to employing female staffs to diversify its image. Through its annual
report, it said that it would employ people to various units regardless of age, gender or race through
local people and work anywhere free from discrimination and harassment(Ralston, Hargrave& Dunn,
2017).
The company will engage the society and diversify the business through community growth and
development plans(Ralston, Hargrave& Dunn, 2017).Glencore seeks to be admired by employing
transparent tax paying policies in various countries of operations(Ralston, Hargrave& Dunn, 2017).

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Incentives on trade deals and regulations; Glencore promised to pay Rio’s Coal and Allied unit in thermal
coal operations in New South Wales by offering a $ 225m deposit and $ 25m a month if the deal
delayed.
The company had a net profit of $2.77b in H1, 2018, up 13%from the previous year, boosted by
strong performances from the group’s metals and minerals and energy products segment(Ralston,
Hargrave& Dunn, 2017). Oil marketing volumes fell(Ralston, Hargrave& Dunn, 2017). The company did
not give a specific reason to the fall but said that change in market structure was providing very little
incentives to store oil.
Conclusion
Glencore being on of largest companies in mining and trading of commodities merged with
Xstrata in 2013. However, the company’s rising to the top in trade hasn’t been a smooth journey. The
company has faced major accusations based on bribe and corruption from the developing countries in
Africa like Congo and Nigeria with some trials going on to date. It has got major shares in most countries
ahead of other companies. Glencore is trying to comply with the regulations of different countries to
avoid getting into losses while applying incentives on it productions to boost its revenue.

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