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The Glencore (LSE: GLEN) share worth has surged in latest months, making it one of many prime performers within the FTSE 100. With copper costs up 20% over the previous 12 months, can robust metals demand outweigh ongoing weak spot in coal?
Australian coal
Whereas many rivals are exiting coal, the miner has doubled down, even buying Teck Assets’ steelmaking coal enterprise final 12 months.
But the technique is beneath critical stress. Benchmark Newcastle coal costs are down 20%, and onerous coking coal has fallen by a 3rd. Australia, the place it has main operations, has felt the affect probably the most.
Operational prices are climbing as mines go deeper and labour stays tight. On prime of this, the Australian authorities just lately introduced a A$600m rescue package deal to maintain Glencore’s loss-making copper smelter afloat.
Vital minerals on the rise
The Australian authorities’s intervention highlights an even bigger development: securing important minerals provide is changing into a nationwide precedence.
Simply because the house race of the Fifties outlined a era, the worldwide race for AI dominance is ready to reshape industries – and geopolitics.
It isn’t nearly China’s generative AI mannequin, DeepSeek. Governments are positioning themselves to manage metals important not just for AI but additionally for renewable power, making a strategic bottleneck that would have long-term implications for miners like Glencore.
Capital spending crunch
At the same time as demand for important minerals surges, business capital spending barely budged – rising simply 5% in 2024, down from 14% the 12 months earlier than. That’s a warning signal for anybody betting on the power transition.
Copper, specifically, is beneath the microscope. The Worldwide Vitality Company predicts a 30% provide deficit by 2035. And with good cause: the easy-to-mine deposits are lengthy gone.
Chile is usually likened to the second-largest oil-producing nation by being referred to as the ‘Saudi Arabia of copper’. However it has seen flat output and new discoveries are more and more uncommon. Mining firms are having to dig deeper, actually, to seek out worthwhile ore.
Then there’s the allowing headache. On common, it takes 15 years to show a copper discovery right into a working mine. That’s a protracted wait in a world chasing AI, renewables, and information centres hungry for electrical energy.
All of this implies provide might stay tight for years to return. For miners this presents each a problem and a chance: those that can navigate the complexity could also be nicely positioned to profit from a market that’s out of the blue in brief provide.
Backside line
The miner is concentrating on 850,000 tonnes of copper manufacturing in 2025, rising to round 1 million tonnes by the tip of the last decade.
Even past that, there’s optionality for an additional 1 million tonnes. The corporate is beneath no stress to carry it on-line instantly – growth shall be fastidiously timed when costs replicate an actual provide scarcity.
That issues as a result of copper is central to electrification, AI infrastructure, and the power transition. Provide constraints are more likely to persist, making timing essential.
Glencore’s strategy provides it flexibility to maximise returns with out flooding the market. Whereas share worth swings are inevitable, this mixture of near-term development and long-term optionality retains me assured.
It’s why, regardless of ongoing share worth volatility, I proceed so as to add to my place when funds enable.
