Glencore Share Price to Crash as Commodities Supercycle Fades

Glencore share price has come under intense pressure in the past few weeks as the outlook for commodities worsened. The stock is trading at 420p, which is about 23% below the highest level this year. This means that the company has moved to a bear market.

Commodity concerns

Glencore is a leading mining company that has a storeyed past. The company was started by Marc Rich, who went on to serve jail time for tax evasion. The firm has over the years settled cases worth billions of dollars for several claims. In May, the company agreed to pay $1.5 billion for bribery and market abuse claims.

Glencore is a major company that generated over $203 billion in revenue in 2021. This performance happened as volume and prices for its commodities jumped. It had made over $143 billion in the previous year. 

The Glencore share price has pulled back sharply this year as investors worry about the end of the commodity supercycle. There are signs that demand for most commodities is slowing. For one, the price of copper has crashed to the lowest level since 2020. 

Other commodities that Glencore deals with like nickel, cobalt, and zinc have all declined in the past few months. Iron ore price has crashed to below $100 per ton. However, unlike peer companies like Rio Tinto and BHP, Glencore does not have major iron ore operations.

Indeed, in a report on Tuesday, BHP, which is the biggest mining company in the world, said that it was seeing a sharp decline in iron ore demand. That statement reaffirmed what Rio Tinto warned last week.

Coal to the rescue

Still, Glencore is expected to do relatively better than its peers becaus of its strong presence in the coal business. Coal prices have remained at elevated levels as western countries and Japan mull banning Russian oil. 

As a result, the Asian benchmark for coal prices jumped to $377 a ton, according to Whitehaven Coal. As a result, the giant coal miner expects irs revenue to jump to over $2 billion.

Unlike other mining companies like Anglo American and BHP, Glencore has embraced the coal industry. The management has defied calls from activists to end coal mining and trading. It argues that spinning off the division will not help solve the climate crisis.

Further, Glencore share price will be supported by the company’s trading division that deals with millions of oil barrels every day. In its recent trading statement, the firm said that it made over $3.2 billion in profit in the first half of the year. That was slightly below the $3.7 billion it made in 2021.

Glencore share price forecast

Glencore share price

The daily chart shows that the GLEN share price has been in a strong bearish trend in the past few weeks. Along the way, the stock managed to move below the lower side of the ascending channel pattern shown in purple. The stock has also managed to move below the 50-day and 200-day moving averages while oscillators are falling. 

The shares are also approaching the death cross, when the 50-day and 200-day moving averages make a crossover. Therefore, while Glencore has solid fundamentals, the stock will likely continue falling in the near term. This is in line with my previous Glencore stock forecast that estimates that the shares will fall to 300p.

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