SocGen downgrades Glencore ahead of production numbers

Societe Generale downgraded Glencore to ‘hold’ from ‘buy’ pointing to finely balanced fundamentals.

It said the mining sector has seen a dramatic rebound recently due to an FX-led bounce-back in commodity prices, with the FTSE all-share mining index erasing the losses from early January.

“Such a performance is all the more remarkable given the pain suffered by the broader market amidst concerns over slowing global growth. At this juncture, we do not see the right combination of fundamentals to sustain the positive momentum in mining names,” it said.

It expects Glencore’s fourth quarter production results on Thursday to show a significant quarter-on-quarter drop in the copper and zinc units, reflecting the cash preservation measures put in place.

SocGen reckons full year production is likely to come in at the lower end of management guidance for all base metals, with 1,450kt for copper and 1,420kt for zinc.

“The results are unlikely to be share price-moving given the market’s current focus on profit margins rather than tonnes mined,” the bank said.

It kept its 100p price target on the stock unchanged.

At 1014 GMT, Glencore shares were down 0.1% to 94.36p.