Thomas White Global Investing
Global Players

Global Players

May 2011

Ivan Glasenberg, CEO, Glencore


Ivan Glasenberg

“You’ll sacrifice a lot of things in the early part of your career to be successful, but to be ahead of your competitors, you have to work hard. Many people may say that luck is important, but I think you create your own luck by working hard to ensure you don’t miss opportunities”

— Ivan Glasenberg, while addressing students at the University of Southern California.


In the morning, he moves around with heads of states striking business deals, yet by evening he is ready to nurture a young trader in his commodity trading firm. His sometimes fiery temper rattles the bones of his traders but his innate charm soothes their nerves in times of need. He guards his privacy zealously, yet when he became one of the richest men on earth, he took the limelight ably. Meet Ivan Glasenberg, a former coal trader and the head of the world’s largest commodities trading firm, Glencore, which just recently went public in May 2011. Today, as Glasenberg guides the Swiss-based Glencore to the capital markets, he has emerged as one of the most powerful personalities in the red-hot world of commodities.

In the process of taking the Swiss-based Glencore public, Glasenberg, who owns a 16% stake in the company, is estimated to have become richer by nearly $9.6 billion. He is now expected to be among the 100 wealthiest people on earth. But for all the billions he now has, Glasenberg still remains a mystique personality. He is perhaps one of the few less-chronicled tycoons of our times. Until recently, the entire web probably had less than a dozen photographs of the man.

But all along it was Glasenberg who has preferred to keep it that way. In the five years since he became CEO in 2002, he gave only one interview to the media. His trading floors and industrial plants are a strict no-go zone for any journalist. Even after the IPO of Glencore, when Glasenberg’s wealth became apparent, he reportedly was proud of the fact that his former schoolmates were not even aware that he was a rich man. Perhaps, Glasenberg’s penchant for secrecy was acquired in his three-decade experience as a commodity trader.

Glasenberg grew up in the apartheid-era South Africa and graduated with a degree in accounting in 1981. His legendary work ethic was firmly entrenched at an early age. His interest toward trading commodities started even while he was a student, apparently inspired by an international candle-wax trader. In one of the rare interviews he had given while as a student he was quoted as saying “I observed a man sourcing candle wax from South America and selling it to Japan. I thought, ‘That’s unbelievable. Talking on the phone in his office that man made money moving candle wax from one country to another.’ It really interested me.”

Soon after, the would-be trader headed to the U.S. to pursue a degree in business administration. And just after receiving his degree, Glasenberg was given a job offer in the New York office of the U.S.-based commodity trading firm Marc Rich & Co. But even before he joined Marc Rich & Co, the company became embroiled in a tax evasion case and was forced to scale back its U.S. operations. The controversial trading company subsequently directed Glasenberg to its operations in South Africa.

Back in his home country, South Africa, Glasenberg started overseeing shipping details ensuring the punctuality of shipments. It was here that Glasenberg honed his skills for a career in trading. Working among the rank and file, he developed a knack for establishing long-term relationships and a showed untiring energy to travel the world to make deals. His stints in Sydney, Hong Kong, and Beijing were marked with remarkable success. Even until this day, Glasenberg’s energy and go-go attitude surprise men half his age. Glasenburg, who is now 54, competed in triathlon until the age of 43. He still sticks to his routine of a long jog in the morning.

Ivan is very aggressive and understands the commodities business better than anyone I have ever seen. He’s a hands-on manager. He doesn’t have the number three, four or five person going down into Africa. He goes himself.

— John Mack, CEO of Morgan Stanley in an interview with Bloomberg.

Thanks to this tenacity, Glasenberg climbed through the ranks of Marc Rich & Co within a decade. By this time, Mr. Marc Rich, who was facing tax evasion allegations from the U.S. government and was residing in Switzerland as a fugitive, offered to sell the firm to its senior management. When the deal closed for$600 million in 1994, Glasenberg was a key executive under then CEO Willy Strothotte. The new owners renamed their company Glencore, an abbreviation for ‘global energy commodity resources’. Since the mid-nineties, Glencore has grown at a break-neck speed, eventually becoming the largest commodity trading firm in the world. In addition to just trading commodities, the firm bought huge mining facilities to help deliver its trading commitments. In 2002, just before the prices of commodities began their six-year heady rally, Glasenberg took over the company.

Since then, Glencore has attained a prestigious position in the world of commodities. Under Glasenberg’s leadership, the company spent more than $30 billion on acquisitions that gave it the control over commodities in countries ranging from Canada to Congo and Russia to Zambia. Most of these acquisitions did pay-off handsomely. In the five years since Glasenberg took over as CEO, he grew the company’s profits five-fold. In addition, Glasenburg transformed Glencore from a mere trading outfit into an integrated commodity supplier to a giant firm controlling some of the world’s most critical resources. Today the company controls 60% of the world’s zinc trade, 28% of the coal trade, and 50% of the copper trade.

Yet for all these achievements, Glasenburg and his company have drawn criticism. Rating agencies flail his company for lack of transparency in some of the company’s business dealings. Some of his investors also fret over the challenges of doing business in countries with significant political risks such as Russia and Zambia, and other resource-rich countries. For much of the last decade, rating agencies slapped the lowest investment grade ratings on his company citing the political risk that came with these investments. Glasenburg, for his part, is yet to convince Xstrata, another Swiss mining firm, to a merger, despite Glencore’s 35% stake in the firm.

Glencore’s IPO in May 2011 could address many, if not all, of the complaints leveled on Glasenburg. The move will give him more capital to expand and may eventually allow the company to wield more clout in the commodities market. The transparency that comes with being a public company will have its own advantages. As a public company, Glencore’s trading operations will be strong enough to snap up proprietary trading away from the commodity desks of investment banks.

And, Glasenburg too will have to pay a personal price as a result of this IPO. As the head of a listed company, he will have to be more responsive to all the nagging journalists around, and peek his face into the limelight.

 

 

 

 

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