Glencore

The Glencore share price has nearly halved from its peak in early 2023. Coal prices skyrocketed due to trade dislocations post Russia’s invasion of Ukraine, which benefited Glencore’s coal profits, as well as profits earned in their marketing division (which tends to do well in times of trade dislocations). At that point, the share price implied profits in both these divisions would remain elevated well into the future. Fast forward to today, and coal prices are now trading well into the cost curve (anywhere between 20-50% of producers are losing money at current coal prices). This is not a position that can be held indefinitely, and at some point, coal prices will rebound (we have already seen some mines announce closure). Yet, at R60 per share, the Glencore share price bakes in an overly pessimistic assessment here. On more normal prices, Glencore is back to free cash flow multiples in the teens range, which we view as attractive.

Insights Disclaimer