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Bullish relay race in commodities may be in the early rounds
Glencore (LON:): Leading Asset Class Producer and Trader
New management
The atonement of past sins
Heading for a new record as commodity prices accelerate
Over the past two weeks, base metal prices corrected lower and were at the lower end of the short-term trading range. Copper is the main base metal traded on the London Metals Exchange. , , , , and prices tend to follow the red industrial metal.
Meanwhile has also fallen. On August 9, the energy commodity hit a low of $65.15, just 14 cents above $65.01 on July 20. In the world of commodities, only one company is a leading producer and trader of a wide variety of commodities, including metals, energy and other commodities.
Glencore (OTC:) has its origins in Philipp Brothers, the world's largest commodities company in the 1960s and 1980s. Marc Rich, a rising star at the company, left Philipp Brothers in the 1970s to set up his own shop. That firm, Marc Rich and Company, became Glencore.
While Philipp Brothers went bankrupt due to the downturn in the commodities sector, Glencore prospered. The company purchased commodities around the world and embarked on a merger and acquisition process, including a merger with Xstrata, the Anglo-Swiss multinational mining company, in 2013.
After debt problems in early 2016, the company divested non-essential assets and emerged as a manufacturing and trading power. Glencore's manufacturing capabilities keep the company on the cutting edge of market fundamentals, which fuel their trading acumen. GLNCY stocks have been trading in a bullish trend since the March 2020 lows.
Inflationary pressures look likely to push equities further in the coming months as equities head towards a challenge from the 2012 record highs in the early rounds
Since the March lows -May 2020, raw material prices have risen significantly. In August 2020, it hit a record high of $2063 an ounce. In May 2021, copper and copper prices rose to record levels. Grains rose to the highest level in eight years in 2021.
The tidal wave of central bank stimulus and the tsunami of government stimulus created by the global pandemic planted turbocharged inflationary seeds that blossomed across the commodity asset class.
In 2008, monetary and fiscal stimulus from the central bank and government pushed commodity prices to multi-year and in some cases record highs in the 2011-2012 period following the global financial crisis. Although the global pandemic is a very different event, central banks and governments used the same tools to stabilize the global economy.
The only difference in 2020 and 2021 is that the stimulus levels are much higher. We have already seen it rise. The most recent US data revealed the highest inflation in three decades.
Commodity prices thrive in an inflationary environment, but bull markets rarely move in a straight line. Since commodities are often very volatile, corrections can be brutal.
Over the past few weeks we've seen sell-offs in the asset class, making this the perfect time to consider adding GLNCY to your portfolio.
Glencore: Leading asset class producer and trader
Glencore is a resource giant. The company's website highlights the many tentacles it has in global commodity markets.
The price of copper fell from an all-time high of nearly $4.90 a pound in May to about $4.30 on August 9.
Source: CQG
The above quarterly chart highlights the rise in copper and the upward trend that has driven its price upward for the past five consecutive quarters. A close above the $4.2975 level on Sept. 30 would mark the sixth quarter in a row. In 2020, GLNCY was the second largest copper producing company in the world, with a production of 1.26 million tons.
In August 2021, the price of thermal coal for delivery in Rotterdam peaked at $146 per tonne.
Source: bar chart
The graph shows that coal is at its highest level since 2008. GLNCY is one of the world's leading producers and exporters of thermal and coking coal. Glencore's fortunes are rising with the prices of copper, coal and other commodities.
The company's most recent earnings report, released Aug. 5, showed Glencore's adjusted earnings before interest, taxes, depreciation and amortization rose 79% to a record $8.7 billion in the first half of 2021. $10.6 billion from $15.8 billion at the end of 2020 and will return $2.8 billion to shareholders, reinstating the dividend. Glencore through murky waters for two decades as the company's CEO. Glasenberg was the protégé of Marc Rich. He retired in July 2021, handing over the reins to Gary Nagel.
The new CEO's nickname is "mini-Ivan" as he, like Glasenberg, are both accountants. Both also rose through the ranks and ran the company's coal trade. Thermal coal prices contributed significantly to Glencore's profits.
Meanwhile, this changing of the guard can go a long way toward solving some of the issues facing the company. Glencore has pledged to achieve net zero carbon emissions by 2050. The new CEO's compensation package is indeed linked to ESG performance.
The US Department of Justice, in conjunction with UK and EU regulators, has also investigated the company over corruption charges in operations in the Democratic Republic of Congo, Venezuela and Nigeria. While there are likely to be hefty fines in the offing to resolve the issues, Glencore's profitability will allow the company to put these things behind them and pave the way for a new era led by Gary Nagel. record high as commodity prices accelerate
GLNCY stocks have made higher lows and higher highs since March 2020, when the pandemic sent stocks and commodities to the bottom.
Source: bar chart
The monthly chart above shows that the March 2020 low at $2.51 was higher than the $1.95 low in January 2016 when GLNCY ran into financial trouble. After divesting non-essential assets, stock purchases by the company's management and a recovery in commodity prices, Glencore survived and thrived. The former CEO remains the company's second largest shareholder with a stake of over 9%.
The most recent high came last May, at $9.48 per share. GLNCY surged as copper hit its record high. Above the 2021 high, the next targets are at $11.68 and $12.778 per share, which are the 2018 and 2014 highs. The ultimate upward resistance level is at $15.70, the February 2012 high that came after the IPO. company in 2011.
Glencore is a company that plays a leading role in global commodities markets. Inflationary pressures from central bank liquidity and government stimulus will be the legacy of the pandemic for years to come. Glencore's assets, relationships and know-how put the industrial metals, mining and energy company in the perfect position to take advantage of the rising commodities market.
I expect a new record high in GLNCY shares in the coming years. At $9.16 after the close on Tuesday, Aug. 10, that would push the stock nearly 75% higher.
