Ken Silverstein reports: When Glencore, the world’s biggest commodities brokerage firm, went public in May 2011, the initial public offering (IPO) on the London and Hong Kong stock exchanges made headlines for weeks in the Financial Times and the trade-industry press, which devoted endless columns to the company’s astonishing valuation of nearly $60 billion — higher than Boeing or Ford Motor Co. The massive new wealth turned nearly 500 employees into overnight multimillionaires and made billionaires of at least five senior executives, including CEO Ivan Glasenberg. "We are not going to change the way we operate," vowed Glasenberg, who had started as a lowly coal trader for the Swiss firm nearly three decades earlier and, with the IPO, immediately became one of Europe’s richest men. "Being public will have absolutely no effect on the business."
And what a business it is. The firm was forced to pull back the curtain on its famously secretive doings to go public, and what it revealed shocked even seasoned commodities traders. Glencore, which Reuters once called "the biggest company you never heard of," turned out to be far more globally dominant than analysts had realized. According to its 1,637-page IPO prospectus, the company controlled more than half the international tradable market in zinc and copper and about a third of the world’s seaborne coal; was one of the world’s largest grain exporters, with about 9 percent of the global market; and handled 3 percent of daily global oil consumption for customers ranging from state-owned energy companies in Brazil and India to American multinationals like ExxonMobil and Chevron. All of which, the prospectus said, helped the firm post revenues of $186 billion in 2011 and employ some 55,000 people in at least 40 countries, generating an average return on equity of 38 percent, about three times higher than that of the gold-standard investment bank Goldman Sachs in 2010. Since then, the company has only gotten vaster in scale. It recently announced a $90 billion takeover of Xstrata, a global mining giant in which it already holds a 34 percent stake; if the deal goes through, Glencore will rule over an "empire stretching from the Sahara to South Africa," as the Africa Confidential newsletter put it. As it is, Glencore already trades, manufactures, refines, ships, or stores at least 90 commodities in some three dozen countries. "Glencore is at the center of the raw material world," said Peter Brandt, a longtime commodities trader. "Within this world there are giants, and Glencore is becoming a giant among giants."
What the IPO filing did not make clear was just how Glencore, founded four decades ago by Marc Rich, a defiant friend of dictators and spies who later became one of the world’s richest fugitives, achieved this kind of global dominance. The answer — pieced together for this article over a year of reporting that included numerous interviews with past and current Glencore employees and a review of leaked corporate records, dossiers prepared by private investigative firms, court documents, and various international investigations — is at once simpler and far more complicated than it appears. Like all traders, Glencore makes its money at the margins, but Glencore, even more so than its competitors, profits by working in the globe’s most marginal business regions and often, investigators have found, at the margins of what is legal. [Continue reading…]