2024 hasn’t exactly been a terrific start for the Glencore (LSE:GLEN) share price. The mining stock appears to be firmly heading in a downward trajectory since the new year kicked off. So far it’s tumbled nearly 15%, despite not releasing any trading updates or earnings reports during this time.
What’s going on? And is this short-term volatility creating a buying opportunity for long-term investors?
Growing pessimism around mining
As one of the biggest resource companies around the world, Glencore has its fingers is a wide range of pies. Its mining sites have diversified its product portfolio to contain metals and minerals, including copper, nickel and iron, among others.
Unfortunately, most of these commodities have been experiencing their own volatility of late. Prices have been tumbling as China’s economy starts to ramp back up, partially restoring the imbalance between supply and demand that emerged in 2020.
Looking at Glencore specifically, the group is also seemingly having production-related issues. The firm’s third-quarter production report revealed smaller volumes in all of its leading products, excluding gold and coal.
The cause appears to be a combination of mine closures as well as the disposal of certain assets. Consequently, the product volume guidance for its 2023 full-year results wasn’t exactly signalling the same high growth expansion seen in the aftermath of the pandemic.
Combining all this with analyst forecasts getting cut for the group’s upcoming final quarter production report. It’s being released next month, so investors won’t have to wait long to discover if their concerns are well-founded. But with so much uncertainty brewing, it’s not too surprising to see Glencore’s share price tumble.
A buying opportunity?
As a result of all this pessimism, the mining stock is now trading at a price-to-earnings (P/E) of around 6.6. And with shares trading close to its 52-week low, the dividend yield has been getting pushed higher to around 8.7%. Needless to say, that looks quite tempting. And it would seem management would agree since it’s just completed a $1.2bn share buyback programme ahead of schedule.
In the long run, Glencore will likely have a critical role to play in establishing modern-day infrastructure. It’s already responsible for producing almost 20% of the global cobalt supply. While prices have been tumbling in the near term, demand for this rare metal is on track to surge as it continues to be a critical ingredient for electric vehicle batteries.
A similar story exists for copper, which is essential for building and maintaining renewable energy technologies as well as electrical grids across the planet.
Therefore, I remain optimistic about the long-term potential of this enterprise. Mining is a notoriously cyclical industry. And after a booming period of performance, it’s only natural to see a downturn.
However, personally, I’m waiting for the February production report to be released before making any investment decision. Therefore, Glencore, while looking like a bargain, is staying on my watchlist for now.
