Glencore has warned of a slowdown in demand for commodities from China and the U.S., the two most important consumers of raw materials, in its first public results since its $10-billion (U.S.) flotation last month.
Ivan Glasenberg, chief executive, said high prices and the Chinese government's moves to curb inflation had dampened demand, although he hoped any slowdown would be temporary.
"We see a pullback in China and it will continue," he said. "There are pullbacks in China from time to time when they see inflation is too high." In the U.S., he said that there had been a "slight slowing down," adding that this would "hopefully" be "a temporary pullback."
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Glencore has a privileged view of commodities markets as it controls a large share of trading of industrial raw materials from copper to oil and its reach can allow it to anticipate changes in the cycle. Until now, however, Glencore has rarely made public statements of its views on the direction of commodity prices and demand.
The warning on the outlook for commodities, together with a downbeat response from investors to the first-quarter results, sent Glencore's shares tumbling to 500 pence, the lowest since its initial public offering last month. The stock was the worst performing on the FTSE 100, down 4.5 per cent on the day.
However, Mr. Glasenberg painted a positive medium-term outlook, saying that the effects of China's monetary policy tightening would be short-lived.
"These are short-term ebbs which we see from time to time," he said. "We still believe in the underlying strong fundamentals, with demand continuing to grow in Asia, particularly China and India."
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The company reported net income of $1.3-billion for the quarter, up 47 per cent from a year earlier but below expectations. Investors noted that at the current rate, Glencore would miss consensus forecasts of more than $6-billion for full-year earnings - although Mr. Glasenberg told the Financial Times that higher production would "kick in" later in the year.
Glencore's warning on commodities demand came as China's central bank raised banks' reserve requirements for the ninth time in as many months after Chinese inflation hit 5.5 per cent in May - the highest in nearly three years.
Investors have become increasingly concerned that the commodities boom may have sown the seeds of its own destruction as near record prices slow global economic growth and dent demand.
Some fear that Glencore's initial public offering may have marked the top of the commodities boom. Commodity prices have fallen 7 per cent from a peak touched on the day before the company published its listing prospectus in early May.