Glencore - an interesting nickel-producing company

On the London metal stock exchange, nickel prices caused confusion today, noting an increase of several dozen percent. For a while, a ton of raw material was quoted above USD 100,000. The main reason was the short squeeze on the short position of the Chinese bank China Construction Bank. Nickel prices, however, has been moving in an uptrend for a long time.

Nickel is a raw material that is characterized by exceptional resistance and special properties, thanks to which it has many applications. According to Morgan Stanley analysts, the nickel market continues to show a deficit, which is caused by a significant increase in demand for electric vehicles. At the same time, the stockpiles on the London Metal Exchange are decreasing.

Nickel is used, among others in the energy industry, the automotive industry and the production of nickel-cadmium batteries. It is also used in the so-called industrial superalloys and as an addition to copper coins. Covering the surface of steel or iron with nickel (electrolysis) increases corrosion resistance. The largest deposits of the raw material are located in Russia, Canada, Australia, South Africa, Australia and Indonesia.

The largest Western nickel producers are currently: the Swiss company Glencore (GLEN.UK), the Brazilian company Vabe (VAB.US), listed on the American stock exchange, and the Australian commodity concern BHP Billiton (BLT.UK). The largest producer of nickel in the world remains the Russian Nornikkiel (control of 15-20% of the world's supply of this commodity), but due to sanctions and the withdrawal of some transport companies, nickel supplies from Russia remain disrupted.

Below we present an interesting company from this sector, which has one of the best recommendations from analysts in the industry, according to Marketbeat.com. At the same time, it is worth bearing in mind that analysts can be wrong, and the assessments only refer to the market prospects or the fundamental situation of the company. They cannot protect against future risk factors or market turmoil, which may have a negative impact on the results of mining companies. The commodity market has recently experienced extraordinary volatility, which obviously increases the investment risk.

Glencore (GLEN.UK)

The Anglo-Swiss company deals with the extraction and trade of raw materials such as nickel, aluminum, copper and cobalt, as well as precious metals - gold and silver. Glencore has recently reviewed its operations in Russia and announced that the company has no operational footprint in that country. However, Glencore owns more than 10% of the En + group, which in turn owns more than half of the shares in the Russian-Swedish Rusal, a low-carbon aluminum producer. The En + group employs over 90,000 people worldwide and is capable of producing almost 4 million metric tons of aluminum.

JP Morgan analysts estimate that every 10% increase in nickel prices will increase Glencore's profit by 1 to even 3%. Taking into account the growing nickel prices, analysts can expect an even 12% EBITDA increase. In 2021, the company produced 102,000 tonnes of nickel from its own resources, and this year it intends to increase production by nearly 10%. To date, the company has sold a tonne of nickel for an average of $ 18,474. In turn, the extraction of precious metals by the company in 2021, i.e. gold and silver, amounted to 809 and 31 516 tons, respectively.

The total volume mined by Glencore in 2021 fell compared to 2020, in part due to supply chain problems and the closure of some mines. At the same time, however, commodity prices are soaring, which compensates for a potential slowdown in production. Due to the lack of activity in Russia, the company was not affected by the situation caused by the Russian invasion of Ukraine and Western sanctions. Glencore share price is gaining slightly today despite information that the sale of shares by one of the bigger holders, former copper director Aristotelis Mistakidis.

Glencore currently has 7 'Buy' recommendations with no 'Hold' and 'Sell' recommendations.

Glencore (GLEN.UK) has been in an upward trend for a long time. Each time price bounces from the lower limit of the 1: 1 structure, or the average EMA100, a new upward impulse is initiated which leads to new local highs. Source: xStation5