Trader into miner

That was before Glencore listed on the London Stock Exchange in May 2011 at 530p and then acquired mining giant Xstrata a year later.

Mr Glasenberg now describes Glencore as “the most diversified commodity producer and marketer” arguing that it is “well positioned to benefit from any improvement in pricing when it finally and inevitably materialises”.

He would like you to believe that Glencore is a steady income-generating stock that simply buys mining assets on a long-term view and then sells its produce through a trading division that collects a margin on every deal. All very low risk.

But Mr Glasenberg is showing all the signs of being a dyed-in-the-wool trader.

First there was the Xstrata deal which was supposed to be a merger of equals until Xstrata chief executive Mick Davis and almost his entire team of mining executives were shown the door soon after the ink had dried.

Also take a look at Mr Glasenberg’s description of Glencore again. He said it’s “well positioned to benefit from any improvement in pricing when it finally and inevitably materialises”.

This betrays a belief in the company’s massive bet on the price of copper.

Falling profits

With that in mind the profit performance is slightly academic. A first half loss of $676m (£431m) and adjusted first half earnings of $6.46bn, a 29pc fall from the same period last year, are to be expected. Mr Glasenberg can expect some pain as he waits for the copper market to turn.

Traders have tried, and failed, many a time to corner the market for commodities. Usually it results in painful losses for the person or banks involved. Perhaps for the first time we are now seeing a FTSE 100 company and its balance sheet being used to fund a trading position.

The problem with all trades, as John Maynard Keynes pointed out, is that the market can stay irrational longer than you can stay solvent.

Credit squeeze

That is where Glencore’s crucial BBB credit rating comes in. It needs this rating to get the loans required to fund its positions; without it, things would quickly unravel.

The capital expenditure has been cut, but the cash is still flowing out of the door on projects, just at a reduced rate. The net debt pile was also trimmed by $1bn to $29.6bn.

That being said, nothing matters as much as the copper price, which fell to a six-year-low of $5,085 per tonne yesterday.

We feared that Glencore shares would suffer from tumbling commodity prices and placed a 162p price target when we advised selling (Sell, 244.2p, January 15). Mr Glasenberg shows no hint of backing down from his trade in these results. If he’s right and prices recover he’ll pull off his greatest trade. Questor thinks investors should stay well away from the shares as there are huge risks if prices fall further.