I assumed Glencore (LSE: GLEN) shares appeared like a cut price again in 2023, so I purchased some that July and topped them up in September, pondering I used to be getting good worth. As an alternative, I caught a falling knife.

Over the previous 12 months, Glencore’s share price has plunged 47.5%, from 501p to 263p. That will have turned a £10,000 funding into round £5,250. A few dividend funds ease the ache barely, however not by a lot.

Small dividends, huge losses

A 12 months in the past, that £10,000 would have purchased 1,996 shares. After reinvesting final September’s dividend of 4.94p per share, that may have added one other 25 shares, lifting the entire to 2,021. 

The following Glencore dividend, due on 4 June, is about at 3.765p, which must be price about £76. If reinvested that lifts the entire worth to round £5,425. Nonetheless grim studying.

Right now, the dividend yield sits at 2.85%. Forecasts counsel that would climb to three.5% this 12 months, with cowl of 1.5 instances. However that alone doesn’t make up for the huge share price drop.

Whereas the FTSE 100 has risen 4.6% for the reason that begin of the 12 months, Glencore’s gone the opposite manner, sinking 27.5%. Working margins are scraping the ground, presently at zero, and even subsequent 12 months’s forecasts solely raise them to 2.9%. Return on capital employed can also be meagre at simply 1.6%.

The FTSE 100 group’s first-quarter outcomes, launched on 30 April, provided little to alleviate the gloom.

Copper-bottomed struggler

Copper manufacturing fell 30% year-on-year to 167,900 tonnes. Administration blamed decrease mining charges and weaker grades at main websites in Chile and the DRC. Nickel output additionally fell sharply, down 21% to 18,800 tonnes.

On the brighter facet, steelmaking coal surged, due to the Elk Valley Sources acquisition, whereas cobalt manufacturing jumped 44% to 9,500 tonnes. These beneficial properties although, weren’t sufficient to revive the moribund inventory.

CEO Gary Nagle blamed world commerce uncertainty, tariffs and financial softness as ongoing considerations. They nonetheless are, and I can’t see that altering for some whereas. Nagle additionally famous that risky situations may finally create advertising alternatives. That hasn’t occurred but.

Outlook could also be brighter

There was a time when the commodity sector may depend on China’s roaring development and insatiable demand for uncooked supplies. These days are over. China now faces main structural issues, from a property disaster to demographic decline, and is locked in a commerce struggle with the US.

The worldwide image doesn’t supply a lot both. Europe’s economic system’s stagnant, and the US may nonetheless tip into recession.

I could also be glum about Glencore, however analysts are taking a really totally different view. The 16 following this inventory have produced median 12-month share price forecast of simply over 384p. That’s a rise of roughly 46% from immediately. If that occurs, I’d wipe out my losses. However that’s an enormous ‘if’.

Commodity shares are notoriously cyclical. Once they fall, they usually fall laborious, however they don’t keep down ceaselessly.

I gained’t be shopping for extra. I already maintain a sizeable chunk, and easily staying invested feels courageous sufficient. However for contrarian traders keen to take a threat, this may be a second to think about shopping for Glencore shares. The important thing phrase there may be ‘might’.