Commodities chaos: can the Glencore share price hit 600p?

Russia’s war in Ukraine has sent commodity prices soaring and analysts are hiking their Glencore share price targets. How high can this FTSE 100 stock go?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Russia’s invasion of Ukraine is a tragedy and a cataclysm that has sparked chaos in global commodity markets. In recent days, nickel trading was suspended after prices doubled to over $100,000 per tonne, oil soared to $130 per barrel and wheat prices spiked to record-breaking levels. FTSE 100 commodities giant Glencore (LSE: GLEN) seems well-positioned to capitalise on this. Yesterday, Goldman Sachs lifted its price target for Glencore stock to 600p. So, how high can the Glencore share price go? Let’s explore. 

Glencore shares reach 52-week highs 

The Glencore share price rocketed by 21% over the past month (it’s also up nearly 50% in five years) and currently trades at 511p. The Anglo-Swiss conglomerate is one of the world’s largest commodity businesses, spanning the precious metals and energy markets, with around 150 mining, metallurgical, and oil production assets to its name. 

Some economists are heralding the arrival of a commodities bull market and in February, Glencore reported record earnings of $21.32bn and net profits of $4.97bn for 2021. With this in mind, I’ll examine Glencore’s exposure to different commodities and what I think this means for the Glencore share price.  

Metals 

Glencore’s metals business is primarily focussed on copper, cobalt, zinc, nickel and ferroalloys. It’s a different investment prospect to beaten-up gold mining stocks with significant Russian operations, such as Polymetal International and Petropavlovsk. 

Glencore can benefit from rising demand for electric vehicles, which rely on nickel and cobalt as materials for battery production. These metals saw price increases of 161% and 57% respectively from last year. At current prices, nickel would comprise 12% of Glencore’s EBITDA. 

However, reports that Beijing is mulling a rescue deal for Tsingshan Holding Group, the company behind nickel’s big short, could send prices tumbling. Although Glencore is diversified across different metals, it’s not just nickel that has experienced extreme volatility in recent weeks. I expect further volatility ahead in metals markets and, by extension, in the Glencore share price.

Energy

Glencore’s energy business is centred on coal production and marketing crude oil and natural gas. Coal prices recently hit a 200-year high. Oil and gas have made similar although less dramatic gains.

North America and Europe are keen to transition away from fossil fuels to green energy sources. This may dampen the long-term case for Glencore shares.

However, demand for these commodities remains strong in Asia, with China, India and Japan making up the largest coal importers. I believe headwinds for the Glencore share price from government climate policies will likely take a long time to materialise. 

Wheat

Russia and Ukraine collectively account for nearly 30% of global wheat exports. Glencore is one of the world’s largest wheat traders. Although the stunning rally in wheat prices has boosted Glencore stock, the company recently condemned Russian military action in Ukraine and announced a review of its activities in Russia.

The longer-term consequences of the war for Glencore’s wheat trading business are far from certain. 

Where next for the Glencore share price? 

Predicting Vladimir Putin’s next move in Ukraine is difficult, but geopolitical stability seems unlikely to arrive soon. For me, this creates bullish conditions for commodities and Glencore stock is a good buy for me at its current price, despite reaching new highs. I believe the Glencore share price may carve a path to 600p in the months ahead, although it may be a bumpy ride. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Charlie Carman has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Could the FTSE 100 be set to soar in 2024?

The FTSE 100 keeps threatening to go off on a growth spree. And weak sentiment keeps holding it back. But…

Read more »

Investing Articles

Is this FTSE 100 stalwart the perfect buy for my Stocks and Shares ISA?

As Shell considers leaving London for a New York listing. Stephen Wright wonders whether there’s an undervalued opportunity for his…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

3 things I’d do now to start buying shares

Christopher Ruane explains three steps he'd take to start buying shares for the very first time, if he'd never invested…

Read more »

Investing Articles

Investing £300 a month in FTSE shares could bag me £1,046 monthly passive income

Sumayya Mansoor explains how she’s looking to create an additional income stream through dividend-paying FTSE stocks to build wealth.

Read more »

Investing Articles

£10K to invest? Here’s how I’d turn that into £4,404 annual passive income

This Fool explains how using a £10K lump sum can turn into a passive income stream worth thousands for her…

Read more »

Investing Articles

1 magnificent FTSE 100 stock investors should consider buying

This Fool explains why this FTSE 100 stock is one for investors to seriously consider with its amazing brand power…

Read more »

Rainbow foil balloon of the number two on pink background
Investing For Beginners

2 under-the-radar FTSE 100 stocks under £2

Jon Smith identifies two FTSE 100 stocks that he believes are getting a lack of attention from some investors but…

Read more »

Investing Articles

£8,000 in savings? I’d use it as a start to aim for £30k a year in passive income

Here's how regular investing in the UK stock market, over the long term, could help us build up some nice…

Read more »