GLNCY Glencore Plc (PK)

LONDON—Glencore PLC on Thursday reported lower production of copper, coal and zinc in the year's second quarter as it continued to try to lift prices through output cuts, though results have been mixed.

The Swiss-based mining and trading giant is among the world's largest producers of those metals, so with commodity prices and the company's shares plumbing new depths last year, Glencore launched a plan to shut in production. That's something Chief Executive Ivan Glasenberg had long urged other miners to do.

"This material can be dug out of the ground at a later stage when you get better returns and you get the required returns that you want from these assets," Mr. Glasenberg said in March.

It's unclear how well Glencore's gamble has paid off.

In September, the company announced plans to shut two African copper mines over an 18-month period, reducing copper output by 400,000 tons. The cuts contributed to a 3.2% drop from last year in the company's copper output. to 368,000 metric tons in the quarter ended June 30.

Copper prices haven't kept pace with the wider rally in commodity markets though, gaining about 3% so far this year.

The company has had better results with zinc, a metal used in the manufacture of steel and brass and a commodity that Glencore has long dominated.

In October, Glencore curbed production at several zinc mines that together produce 500,000 tons of zinc annually. Zinc production at Glencore fell 33% year on year in the second quarter to 249,400 tons.

Glencore's cuts in zinc production are forecast to account for roughly 4% of a 12 million-ton global market, according to Liberum Capital analyst Ben Davis. It's unlikely that new production capacity will be able to quickly replace lost output from Glencore and the nine zinc mines that closed last year, said Mr. Davis, meaning the price rises will likely stick.

Zinc prices have increased about 40% this year because of the supply cuts and buoyant demand after China, the world's largest consumer of many commodities, announced a raft of economic stimulus measures.

"The company will certainly feel vindicated in their strategy" to cut zinc output, said Macquarie analyst Alon Olsha.

Glencore declined to comment.

The company's share price has more than doubled this year after being the worst performer in the U.K.'s FTSE 100 blue-chip index last year. Shares have benefited mostly from a recovery in commodity prices, particularly coal and zinc, two of the company's biggest earnings drivers, analysts said.

Shares have also been helped by Glencore's turnaround plan, which would significantly reduce its net debt by cutting costs, suspending dividend payments and selling billions of dollars of assets, among other things. The plan is bearing fruit with analysts expecting net debt to drop to well within the company's guided range of $17 billion to $18 billion by year-end, down from $29.6 billion in June 2015.

Coal is more of a mixed picture. It is Glencore's second-biggest earnings driver after copper and a favorite of Mr. Glasenberg, who made his name as a coal trader as he rose through the ranks at Glencore.

However, Glencore has shut down about nine million tons of thermal coal output, or about 1% of the global seaborne coal market, said Mr. Davis. Others also cut some voluntarily, others not, in response to a protracted price rout last year.

Thermal coal prices are up nearly a third this year, though Glencore may not be in position to benefit. The company's coal production fell 12% from a year ago in the quarter to 29 million tons.

"On coal, it's unclear to what extent they have benefited," Mr. Davis said.

Write to Alex MacDonald at alex.macdonald@wsj.com and Scott Patterson at scott.patterson@wsj.com

(END) Dow Jones Newswires

August 11, 2016 14:45 ET (18:45 GMT)

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