Glencore (LON: GLEN) share price has moved sideways in the past few months as investors focus on the company’s change of strategy and its implication. The stock was trading at 450p on Friday, its lowest point since December 14th. It struggled to move above the key resistance level at 477p in 2023.
Glencore share price chart
Glencore is changing its strategyGlencore, one of the biggest mining and trading companies in the world, is going through a transition process. In it, the firm is working to separate its coal business with the rest of the metals that it mines.
It is doing that by acquiring Teck Resource’s steelmaking coal operations in a deal valued at over $9 billion. After this buyout, Glencore will combine its coal company with Teck’s and list the new firm in New York. This will become the biggest coal company in the world.
This is a major decision for Glencore, a company that has made a fortune in the coal business over the years. It is also a gamble that demand for metals like copper, lithium, and nickel will continue rising in the next few decades.
The most recent results showed that coal and energy products are a key part of Glencore’s business. Its adjusted EBITDA in metals and minerals came in at $3.88 billion while energy products retreated to $4.5 billion.
In this case, Glencore will hope to attract more investors, especially in Europe who are more concerned about climate change and the energy transition. Glencore also aims that its coal company will attract a strong valuation in the US, where investors are less concerned about the climate.
Lessons from Anglo American and Thungela Resources
Anglo American vs Thungela
Glencore is not the only mining giant that has exited its coal business after coming under intense pressure from activists. In 2021, Anglo American completed its spin-off of Thungela Resources business.
Since then, as shown above, Thungela Resources stock price has surged by more than 600% while Anglo American has slumped by 31%. This performance is because coal demand has jumped sharply in the past few years.
Energy experts believe that coal will continue being a major energy source for decades to come even as the energy transition continues. At the same time, the ongoing slowdown in coal investments mean that supply will come under pressure in the coming years.
Analysts caution that clean energy alternatives like wind and solar are not reliable. Wind turbines can only generate energy when wind is blowing while solar panels can only work when the sun is shining.
The biggest risk to coal is natural gas, whose price has retreated sharply since 2022. Natural gas is usually more reliable and is cleaner than coal.
The other risk for Glencore and Anglo American’s remaincos is that clean energy metals like lithium, cobalt, and nickel have crashed. This retreat is is mostly because the EV industry is slowing while most of these metals are in an age of abundance. For example, Lithium Americas discovered a major lithium mine in Nevada in 2023. This mine is expected to come online in 2026 in an industry that is already being oversupplied.
The post Glencore stock: Lessons from Anglo American and Thungela Resources appeared first on Invezz
