The size of the fall in Glencore’s (LSE: GLEN) share price over the past few years, has taken me completely by surprise. Since topping out at 575p in early 2023, the stock has fallen 58%. The extent of the sell-off has accelerated recently. Year to date, its down 33%. Having been bullish on the stock for so long, is it time for me to sell and move on?
Q1 production
Compounding its problems was the release of a disappointing set of production figures last week (30 April). Copper production in particular was extremely weak.
Lower ore mining rates, head grades and overall recoveries at its various copper mines, resulted in production coming in at 167.9 kt — a full 30% down on the same period last year. However, it didn’t change its full-year guidance. As in 2024, it expects production to ramp up in the second half.
One beacon though was a strong set of numbers from its steelmaking coal business. The vast majority of its 8.3m tonnes came from Elk Valley Resources (EVR), which it acquired in July 2024. As globalisation trends reverse, and manufacturing slowly moves back to the US, I believe this could turn out to be an excellent long-term investment.
Critical minerals
In March, the US administration signed an executive order classing virtually every base metal Glencore produces as a critical metal. Today, it’s tariffs that are restricting global free trade. But that’s just one piece of a much larger jigsaw. Nation states are beginning to treat metals as strategic assets.
Back in February, the Democratic Republic of Congo (DRC), banned the export of cobalt. This was in response to falling prices. Since then the price of the metal has risen 50%. It’s now considering extending the ban.
This matters hugely. Cobalt is found in the likes of phones, electric car batteries and wind turbines. Without it, planes couldn’t fly. And the DRC mines two-thirds of global production.
Where is all this heading? Well, there’s a distinct possibility that countries such as DRC could team up with other metal-producing nations and form a sought of OPEC-type cartel for minerals. This wouldn’t be good for countries such as the US that rely on imports.
Marketing business
One area of Glencore’s business which is very difficult to predict at the moment is its marketing division. On the face of it, falling global economic growth isn’t likely to be very good for that business. For 2025, the miner expects earnings before interest and tax (EBIT) to be “around the middle” of its long-term range of $2.2bn-$3.2bn.
One thing that I learnt from the extraordinary market dislocation of 2022, is that heightened volatility in commodity markets has the potential to turn its marketing business into a cash generating machine.
In the short term, it wouldn’t surprise me if implemented tariffs don’t have some effect on commodity supply chains. Physical trade flow re-orientation, including diverting ships in mid-transit, can only be good for its marketing business. Longer term, the increasing strategic importance of metals could be very favourable too.
For investors who can stomach a heightened level of volatility in their portfolio, Glencore is certainly one to consider. I won’t be selling my holding, that’s for sure.
