BHP, Glencore and Anglo American have been trading weaker on the JSE in the past seven and 30 days, and analysts attributed this to the exposure they have to minerals and commodities whose prices are under pressure from geopolitical tensions and shifting investor focus.
Anglo American will report interim financials today against indications that it is making progress with the disposal of Amplats and reported plunging earnings in Kumba Iron Ore. The dual-listed company opened yesterday’s trade session on the JSE marginally weaker before overturning the share losses into a 1.70% increase, strengthening to R526.79 per share in the afternoon.
However, Anglo American, which is placing increased focus on copper production, has been trading 8.2% and 10.1% weaker in the past seven and 30 days respectively.
BHP, which abandoned a takeover bid for Anglo American, was marginally lower in afternoon trade on the JSE yesterday although its trade over the past one week and one month has been weaker by 5.96% and 2.62% respectively. This is in addition to BHP’s 20.58% value reversal in the year to date comparative.
Anglo American has exposure to iron ore, copper, platinum group metals (PGM), to a lesser extent diamonds, as well as nutrient commodities. BHP is exposed mainly to iron ore, copper, and coal and to a lesser extent potash and is suspending its nickel operations in Australia, citing weaker prices and oversupply.
“The underlying commodities and resources that Anglo American, BHP and Glencore produce have been weak; platinum, palladium, coal and even oil have been falling in prices, with the only exception being the gold price,” said a local analyst yesterday.
“The market also goes in cycles where big mining houses are being bought but now money seems to be flowing in the the USA into Nasdaq stocks.”
Bruce Williamson, mining analyst at Integral Asset Management, attributed the plunge in the share value of the three resource groups in the past week and month to “the exposure that the three miners have to their underlying” investments and to global geopolitical tensions and uncertainty.
“Broadly all of them (their major commodities) are under pressure from global geopolitical tensions, actual wars, trade wars, especially tariffs on Chinese exports whose economy was already under pressure due to the housing crisis,” said Williamson.
“The China 3rd Plenum ending last week offered no new stimulus, except for a small cut in near term rates from 1.8% to 1.7%.”
Despite being 0.14% stronger in afternoon trade on the JSE yesterday, Glencore has fallen by more than 7% in the past seven days and year to date while in the past 30 days it has traded 2.89% lower.
However, investment manager, Ron Klippin, told Business Report that Glencore was a “diversified resource company” that was focusing on growing its copper production. Copper was becoming a sought after metal for large producers seeking to tap into its allure for the renewable and cleaner energy sector.
Williamson, however, emphasised that with “significant uncertainty around the US November election and concerns around the pre-election Trump versus Harris debates” investors are waiting to see “policies the Republicans and Democrats are going to present” to voters.
“A large part of the US consumer base is also under pressure. All in all, a very uncertain time concerning global and in-country politics and weak economic activity,” he added.
To this end, investors were now adopting a “wait and see attitude and looking for certainty” regarding EU/China tariff investigations, outcome of the next US presidential election and policy direction.
“The uncertainty is reflected in the support for gold,” said Williamson.
For Anglo American, “reliance on Amplats was having a negative impact,” added Klippin. Nonetheless, Anglo Platinum is being demerged as Anglo American refocuses its strategy, which in any case could set up Anglo American “as a target for predators,” a few weeks after BHP walked away from making a firm offer.
BUSINESS REPORT