AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
The commodities supercycle that happened during the pandemic has faded as concerns about China’s recovery ease. As a result, most commodiy prices have dropped in the past few months. The closely-watched Invesco Commodity Index Tracking Fund (DBC) has plunged by over 27% from the highest point in 2022.
Mining stocks disappoint
Mining stocks were among the best performers in the FTSE 100 index in 2022. This happened as these companies reported strong revenue and profits as the commodity supercycle continued. For example, a company like Glencore generated over $255.96 billion in revenues, higher than the $203 billion it made in the previous year.
Recenttly, however, mining stocks in the UK, Australia, and the US have underperformed. On Friday, Anglo American share price crashed by more than 2.2%, making it one of the worst FTSE 100 constituents. At the same time, Gkencore, Antofagasta, and Rio Tinto share prices plunged by more than 2%.
Friday’s decline was not a single-day event. Rio Tinto (LON: RIO) stock price has plunged by over 19% from the highest level in 2022. Similarly, Glencore stock has eased by over 22% while Anglo American shares have fallen by 37%. They are sitting at the lowest level since October 2021.
Anglo American, Glencore, and Rio Tinto shares
China growth is a concern
Most mining companies do well when the Chinese economy is firing on all cylinders. This happens since China is the biggest buyer of most commoditie like copper, iron ore, and nickel. It also buys vast amount of coal and crude oil. As shown below, most commodities have been falling.
Copper, Nickel, and Brent oil chart
Recently, however, there are signs that the opposite is happening. Data like industrial production, retail sales, and manufacturing PMIs have been weaker than estimates.
Most importantly, the crucial real estate industry is going through major headwinds as it struggles to rebound. Analysts at Goldman Sachs and HSBC are the latest to slash their economic forecast for the year. Those at Goldman Sachs believe that the economy will expand by 5.4% this year while HSBC sees it growing by 5.3%.
Investors believe that mining companies will now have less shareholder returns than what they had in 2022. In fact, some firms like Anglo American and Rio Tinto have decided to slash their dividends this year.
Looking forward, the performance of these mining stocks will depend on the performance of key metals like copper and iron ore. It will also depend on corporate consolidation in the sector. Glencore has already expressed interest in Teck Resources while Newmont is focusing on Newcrest.
The post Anglo American, Glencore, Rio Tinto share prices tumble as commodities sink appeared first on Invezz.
