Glencore PLC, a powerhouse in the global commodities market, has long dictated its trajectory by navigating the tides of fluctuating commodity prices. Glencore’s recent market dynamics have tested its mettle, challenging the upward trajectory it once seemed to navigate effortlessly as a major player in the production and distribution of vital resources.
The company’s recent journey unveils a narrative shaped by the ebb and flow of commodity values. After a remarkable 40% surge in market value propelled by record-high commodity prices in 2022, Glencore now faces a contrasting landscape, which threatens to end three consecutive years of share price gains. The tides have turned, and 2023 witnesses a different trajectory, reflected by a 6.80% decline in share price, influenced significantly by the substantial drop in commodity prices.
The decline in crucial commodities like coal, oil, and gas echoes broader trends evident in indices such as the S&P GSCI Industrial Metals and Energy Indexes, reflecting staggering average price drops of 17% and 26% in the first half of 2023 compared to the previous year. These price plunges reverberated through Glencore’s financial performance, marking a notable downturn in its revenue and net income.
The company’s half-year figures for 2023 reflect this downturn starkly, showcasing a 20% decrease in revenue to $107.42 billion and a staggering 62% tumble in net income to $4.57 billion compared to the same period in 2022. Both pillars of Glencore’s business—the Metals and Minerals segment and Energy Products division—faced substantial blows. EBITDA in Metals and Minerals tumbled by 44% to $3.89 billion, and the Energy Products division endured a harsher decline of 54%, landing at $5.85 billion.
Source: Trive – Glencore PLC, Nkosilathi Dube
In a spate of challenges, Glencore faces investor discontent over its climate report, prompting a revised plan by March 2024. Shareholders, including BlackRock, seek emission cut clarity, with 29% backing coal production disclosure. The Teck acquisition prompts a thermal coal spin-off, while Glencore pledges to address climate aspects and engage stakeholders amid mounting pressure for transparency.
Technical
Glencore’s share price dynamics showcase a tug-of-war between key levels, echoing broader market indecision. Initially, a sharp decline in early 2023 set the tone for the year’s trajectory. However, since then, the price has carved out a distinct rectangular pattern, oscillating around its 100-day moving average, reflecting market uncertainty.
This pattern delineates clear boundaries: a robust support at R96.39 per share and a resistant ceiling at R109.99. Notably, market behaviour has adhered to these levels, bouncing off the support and failing to breach the resistance, reinforcing their significance.
Recent movements hint at a potential shift. A bounce from the support led to a surge, propelling the share price above the 100-day moving average. With the resistance level approaching, a retest seems plausible, potentially validating its strength.
However, amidst this uncertainty, technical analysis suggests a possible downside. Should the market sentiment reverse, the R96.39 support level could act as a buffer against further declines, provided market indecision persists.
The share’s behaviour reflects a market grappling with conflicting forces—potentially signalling a forthcoming test of resistance, yet poised for a reversal if downward pressures resurface. This price action between key levels mirrors the broader market’s struggle for direction, underscoring the significance of these pivotal price points in Glencore’s current narrative.
Summary
Glencore’s journey through volatile markets has been tumultuous, marked by steep declines in commodities prices and its financial performance. The company grapples not only with macroeconomic shifts but also investor demands for transparent climate action. Amidst technical patterns hinting at potential shifts, Glencore’s resilience faces a crucial test, navigating a path forward amidst conflicting pressures and pivotal price thresholds.
Sources: Glencore, Reuters, IOL, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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