Glencore, Vale share prices at risk after key BHP warning

Glencore (LON: GLEN) and Vale (NYSE: VALE) share prices could be at risk as some of their key metals sink. Vale stock has already cratered by over 12.7% from its highest point in December while in London. Glencore has slumped by 13%. This trend could continue as traders react to a major warning from BHP.

Vale vs Glencore stocks

The biggest mining news on Thursday was an earnings report by BHP, the biggest mining company in Australia. In its statement, the company said that it could take a big writedown in its nickel segment after the recent price plunge. Nickel, a metal used to manufacture batteries, has crashed by over 45% in the past 12 months.

BHP is not alone in lowering the value of its nickel assets. For example, First Quantum said that it would halt its nickel and cobalt operations in Australia. Other nickel mining companies like Glencore and Vale could be forced to do the same.

Nickel, cobalt, and lithium prices have crashed hard in the past few months even as demand for electric vehicles has remained high. Tesla, the biggest automaker in the world, sold over 1.8 million vehicles in 2023. Globally, total EV sales surged to over 12 million and the trend will go on, albeit at a slower pace.

Prices have also dropped because we are in an era of abundance with countries like the Democratic Republic of Congo (DRC), Zimbabwe, Australia, Chile, and Indonesia rumping up production. In the US, the Biden administration is working to increase battery metals.

Therefore, there is a likelihood that Glencore and Vale will also writedown their nickel and battery metals assets. In this case, Vale is the second-biggest nickel mining company in the world after Russia’s Nornickel. Glencore is the third-biggest while Anglo American is the fourth.

Battery metals are important ones for Glencore as it seeks to transition from coal. The company is doing this by acquiring Teck Resources’ coal operations and then combining it with its assets. It will then form one publicly traded company listed in the US.

Glencore’s metals and minerals business had an EBITDA of $3.8 billion in the first half of 2023 while energy products had $5.8 billion. This performance happened as its nickel, cobalt, and copper businesses struggled as prices dropped. The LME cash price for nickel by June last year stood at $20,346 down from $29,800 in December. 

These metals are also important for Vale, the Brazilian giant. While the company makes most of its money in the iron ore business, it has placed a big bet on energy transition metals. Its revenue in iron rose to $34 billion in 2022 while energy metals surged to $8.3 billion.

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