Low commodity prices reflect too much capital expenditure (capex) rather than weak demand, GlencoreXstrata CEO Ivan Glasenberg said last week.

Speaking during a webcast investor day, Glasenberg said that, while demand for the company’s coal, nickel, aluminium, iron-ore, zinc and copper remained healthy, prices had been falling for 18 months owing to capex excesses.

This had resulted in the underper-formance of the mining sector being striking relative to major global nonmining indices.

While major miners had spent $348-billion capex from 2005 to 2012, they generated a net cash return of only $126-billion, which caused investors to lose patience.

Although supply growth had outstripped demand growth in most commodities as a result of the high levels of capex, there were now early signs that the situation might be improving.

The company made the point that senior management changes in 2012/13 had resulted in enhanced recognition of the issues.

Shareholders also had a vital active role to play in the evolution towards genuinely sustainable balances of supply and demand in commodities and the achievement of appropriate return parameters.

Glasenberg, who spoke of the need for constant vigilance, reported that the merged GlencoreXstrata had completed the integration of the two groups with no operational disruption.

He forecast synergistic cost savings of at least $2-billion in 2014, with capex cuts of headline $3.5-billion from 2013 to 2015.

Underlying capex would be reduced by $1.3-billion from 2013 to 2015, with sustaining capex expected at $4-billion, the lower end of previous guidance.

Brownfield expansions would take care of short-term demand increases and greenfield projects put on the back burner.

For assets to be core, they would have to produce commodities that the company considered tradeable.

Identified as noncore was platinum, in which the company has interests through Lonmin and Eland Platinum, in South Africa.