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Where will the Glencore share price go in September?

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Diggers and trucks in a coal mine
Image source: Getty Images.

Mining group Glencore (LSE: GLEN) has outperformed all of its FTSE 100 rivals over the last year. The Glencore share price has risen by 92% over the last 12 months, compared to gains of between 15% and 60% for rivals Anglo American, Rio Tinto and BHP.

Glencore has already committed to $2.8bn of shareholder returns in 2021. The company also has a new CEO and is committed to developing mining projects that will support low-carbon energy. Is now the right time for me to add this heavyweight miner to my portfolio?

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Shareholder rewards

The first half of 2021 was pretty good for Glencore. In just six months, the company generated an operating profit of $5.3bn – that’s more than during the whole of 2020. 

Some of this extra cash is being returned to shareholders. In addition to the company’s ordinary dividend of $0.12 per share, there’ll be an extra payout of $0.04 per share ($530m) and a $650m share buyback.

Glencore plans to return $2.8bn to shareholders in 2021. If the second half of the year is strong too, I think there’s a possibility this total could rise even further. That could support a further increase in Glencore’s share price.

Betting on electric vehicles

Glencore has faced criticism in recent years for its continued dependence on income from coal mining. The group’s one of the world’s largest producers. Unlike some rivals, Glencore doesn’t plan to sell its coal mines.

However, the company has now published a plan to reduce its emissions to net zero by 2050. Management hopes to achieve a 40% reduction by 2035 — including all-important scope-three emissions, which relate to pollution created by product end users.

Included in this strategy are plans to gradually wind down coal production. Alongside this, Glencore will increase production of metals such as copper and cobalt, which are needed for electric vehicles — including a deal to supply Tesla.

Glencore share price: high enough already?

I think Glencore is in good shape and operating well. The company’s net zero strategy seems competitive and sensible to me.

However, one concern I do have is that prices of major commodities are generally high at the moment. The impact of this is easy enough to see — Glencore’s profit from copper rose from $265m to $2,846m, even though copper production only rose by 2%.

Bullish investors argue that demand is growing faster than supply, so prices could stay high for quite a while. That may be true, but most of the big FTSE 100 miners are now reporting profits close to 10-year highs. This suggests to me we’re getting close to the top.

Broker forecasts also suggest a possible peak this year. The latest estimates from City analysts show Glencore’s earnings falling by 13% in 2022 and by a further 24% in 2023.

I reckon Glencore’s share price could climb a little higher in September. But, in my view, the stock looks fully priced at current levels. I won’t be buying at this time.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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