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New generation of leaders are confronted by climate change
Assessing assets, monitoring acquisitions
Recently hired strategists straight from Wall Street
Bullish Trading Pattern Since March 2020
An attractive dividend and the potential for a new record high in GLNCY
Glencore (OTC:), the Swiss-based miner and marketer of basic materials, is unique in that it is both a producer and a trader.
Founded in 1974 by Marc Rich, a controversial character who began his career with Philipp Brothers, the world's largest commodities trader, Rich taught the commodities trade from scratch. He received his training from some of the most profitable traders in those years and eventually became Philipp Brothers' largest revenue producer.
With a colleague, Pincus Green, Rich left Philipp Brothers in 1974 to set up their own company, Marc Rich and Co. AG in Switzerland. Although Rich ran into trouble with the US government after he traded oil with Iran during the hostage crisis in the late 1970s, his business thrived. It eventually changed from just a commodity trader to a company that not only traded, but also owned commodity assets around the world. In 2013, Glencore acquired Xstrata, a producer of many commodities and became an international powerhouse for selling metals and minerals, oil, gas, coal and petroleum products, as well as agricultural products to customers around the world.
The current inflationary environment puts Glencore in a perfect position to turn a profit in the coming years, and GLNCY is adjusting its strategy accordingly to deliver optimal returns for shareholders. change
Late June of this year, Gary Nagle took over as CEO of Glencore. With its roots in the coal industry, Nagel championed the company's role in the industry when activist investors called on the commodities company to focus more on metals used in a low-carbon global economy. Bluebell Capital Partners said:
"Glencore is not an investment company for investors who place sustainability at the heart of their investment process."
Nagle responded by saying:
“The commitment to phase out fossil fuels is consistent with our strategy to responsibly deplete our coal portfolio over time as we prioritize investments in metals that are needed before the transition. We are committed to reducing our total emissions by 15% by 2026 and by 50% by 2035, both at 2019 levels. After 2035, our ambition is to achieve total emissions of zero by 2050, with a supportive policy environment .”
Nevertheless, Glencore remains a key player in global coal markets, contributing to the company's revenues in 2021. China and India remain significant coal consumers, as the fossil fuel is much cheaper than other fossil fuels and alternative energy sources
Meanwhile, the price action in 2021 was explosive.
Source: bar chart
The chart highlights the price action in thermal coal for delivery in Rotterdam, the Netherlands. In October 2021, the price rose above the record $224 per tonne in 2008 to $280. At over $140 per tonne on December 15, coal was still trading at its highest price since October 2008.
Many energy companies left the coal trade under pressure from activist investors. But Glencore has a dominant position in the global coal arena. The price action has likely caused profits to roll into the company in recent months. strategy under Gary Nagle.
“We have certain assets in our business that are subscale. As we have grown and developed a longer life, premium asset, some assets are not fit for purpose.”
The new CEO wants to ensure that "management time is focused on the right assets in the right jurisdictions in the right goods."
Glencore's unique position as a commodity merchant and producer allows the company to see flows from production to consumption. Glencore is the first to notice price pressure points that lead to trend changes when surpluses or deficits occur. Proprietary trading positions on the long or short side of markets allow the company to increase profits with speculative gains. Stanley executives to grow its franchise in late September. Cyrus Behbehani led Morgan Stanley's investment banking operations in the Middle East. He is likely to expand his profile with the Saudi Investment Fund and other capital pools in the Middle East, seeking diversification of sovereign wealth funds.
The relationship could help Glencore move or swap some of its underperforming assets through mergers and acquisitions.
The company also hired Susan Bates, Morgan Stanley's commodities research analyst. Her position with the trader and producer will enable Ms. Bates to see much more of the global flows that lead to price trends. The company also hired a Morgan Stanley trader to start an electricity firm in Europe.
John Mack, the former CEO of Morgan Stanley, was a longtime board member of Glencore when Ivan Glasenberg led the company from 2013 until he retired in 2020. giant in financial services. $2.51.
Source: bar chart
The chart shows the movement from the March low to a high of $10.79 per share in October 2021. GLNCY shares have more than quadrupled in value. The stock closed at $9.625 on Dec. 14 and is not far below its all-time high. Technical resistance is at its 2018 high of $11.68 and its 2012 high of $15.70
At $9.625, GLNCY has a market cap of $63.71 billion. On average, approximately 342,000 shares change hands every day.
Attractive dividend, potential for a new all-time high
Glencore pays its shareholders a dividend of 29.0 cents, which translates itself in a return of 3.15% at the current share price. In addition to its position in the energy and other commodities markets around the world, GLNCY is a leading producer, which bodes well for revenue growth and additional shareholder value.
Indeed, Goldman Sachs calls copper "the new oil".
The top three copper-producing companies are Codelco, Glencore and BHP (NYSE:). Codelco is the Chilean state copper producer that is the world leader with a production of 1.76 million tons. BHP is the Australian mining giant that produces 1.21 million tons of the red metal.
Glencore's production is 1.26 million tons. With copper at the $4.2 per pound level on Dec. 15, the company is monetizing its copper production. Goldman Sachs has said that decarbonization does not happen without copper and has forecast the price to rise to $15,000 per tonne by 2025. As demand increases, supply will not keep pace as it takes nearly a decade to kick-start new production.
Meanwhile, $15,000 per ton equates to a copper price of more than $6.80 per pound, or more than 50% above the current price. GLNCY is perfectly positioned to benefit from higher copper prices in the coming years. In addition, copper is the leader among non-ferrous metals and other metals essential for battery production. Owning significant copper production assets and its position as a leading metals trader, Glencore is well positioned to take advantage of escalating demand.
I expect GLNCY to climb to new all-time highs in the coming years, surpassing the 2012 high of $15.70. Glencore's recent hires show the company is looking at strategic sales and acquisitions, while strengthening its analytical capabilities to make a profit during a commodities supercycle that started in 2020, continued into 2021, and it appears that commodity prices are 2022 will soar to higher heights. and further.
