Trading in Glencore shares surges! Should I buy, or am I too late?

Glencore shares rose 2% on Tuesday as trading in the commodities firm boomed. The group is on target for a record year. So should I buy the stock?

| More on:
Arrow symbol glowing amid black arrow symbols on black background.

Image source: Getty Images

The volume of Glencore (LSE:GLEN) shares traded rose 8% on Tuesday as the stock jumped 2%. So why is trading up and should I be buying Glencore too?

Why is trading up?

Glencore, one of the world’s largest commodities traders, has seen its revenue increase considerably this year. In fact, it’s on target for a record year.

The Anglo-Swiss multinational commodity trader is active in markets for metals and minerals as well as energy products and agricultural goods.

Last week, Glencore said its annual portfolio mix adjustment guidance was expected to increase massively due to the “unprecedented dislocation” in energy markets.

In February, the firm put its full-year commodities trading guidance at $32.8 per tonne. However, Glencore is now expecting to increase that guidance to a range of roughly $82-86 per tonne for the first half of 2022.

The commodity trading industry is enjoying is most profitable period ever as war rages between Russia and Ukraine.

Amid rising inflation and rocketing diesel and electricity prices, Glencore also expects its average FOB (freight on board) thermal unit cost for the first half to be $75-$78 per tonne. That’s up from an earlier guidance of $59.3 for 2022.

As a result, RBC Capital Markets expects Glencore’s coal earnings to reach $7.9bn in the first half alone.

Would I buy Glencore stock?

So it is right for my portfolio? I’ve been staying away from commodities this past month, and I’m sticking by that.

However, analysts at Citi recently reiterated their “buy” recommendation and set the target price of 700p. That’s some distance ahead of the 480p we’re seeing today. Citi also cited the potential for cash returns of up to $20bn.

Most forecasts are suggesting that we’re entering an era of scarcity and commodity prices should remain higher for longer. In such a case, you’d expect firms like Glencore to continue doing well in the long run.

As electric vehicle sales increase, the group can expect demand for its copper, cobalt, lead and zinc to skyrocket. An uptick in global infrastructure spending is also likely to see an increase in the price of iron ore and other metals used in the creation of steel.

However, such forecasts can be wrong. And there’s clearly a lot of volatility in the market right now. One of the biggest issues putting me off the commodity market right now is the constant threat that fuel-guzzling China will be sent back into lockdown without warning. This would hurt demand for all commodities.

I’ve got Glencore on my watchlist, but I’m not buying for now.

I foresee downward pressure on commodity prices this year as China attempts, on multiple occasions, to stamp out Covid-19 and because of negative economic forecasts around the world.

So it looks likely that the US, UK and parts of the EU will experience a recession in the near future.

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 considered so you should consider taking independent financial advice.

James Fox has no position in any of the shares mentioned. Citigroup is an advertising partner of The Ascent, a Motley Fool company. 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

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

4 of my best shares to buy for an autumn stock market bounce

Jon Smith explains which are his best shares to buy depending on different scenarios behind a potential market rally.

Read more »

Risk reward ratio / risk management concept
Investing Articles

Is the GSK share price good value after the 13% fall last week?

Jon Smith considers the reason behind the sharp fall in the GSK share price last week, and wonders if now…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

Are we about to see a raging bull market for shares?

Investor sentiment looks like it's changing and we could be in the early stages of a bull market for shares…

Read more »

Black father holding daughter in a field of cows
Investing Articles

I’m investing just £5 a day in income stock to aim for £8,000 a year in passive revenue!

Income stocks form the core part of my portfolio, offering me passive income with minimal effort. But I'm reinvesting my…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

3 dividend hero stocks for a monthly passive income

This Fool discusses the investment trusts capable of paying him a lifetime of growing passive income to supplement his portfolio…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

PayPal shares are rising again. Is now the time to buy?

After a massive fall, PayPal shares are starting to recover. Edward Sheldon looks at what's going on and discusses whether…

Read more »

Cheerful young businesspeople with laptop working in office
Investing Articles

Is now the perfect time to start buying AIM stocks?

Might it be worth taking on extra risk and buying AIM stocks for the recovery? One of our writers, though…

Read more »

Young female analyst working at her desk in the office
Investing Articles

1 top British growth stock I’d buy now

This growth stock has tripled since October 2020. Roland Head explains why he still wants to buy this quality business.

Read more »