Mining is again! Or is it? After increase years, miners like Glencore (LSE: GLEN) have discovered the going powerful currently. Final 12 months, post-tax earnings at Glencore fell over 80% and the dividend was reduce by three-quarters. However with indicators that demand for uncooked supplies may very well be set to rebound even amid a reasonably weak economic system, may the Glencore share price rise from right here?

Unsure demand image

On one hand, the outlook for mining continues to be plagued each by uncertainty and a typically weak financial backdrop.

Extra positively, although, governments together with China have currently been laying out plans to extend financial development. We all know that ultimately, demand for pure assets will come again strongly – we simply have no idea when.

In the meantime, Glencore has already been performing properly even whereas the price of most of the commodities it sells – akin to thermal coal – has been weak. Income within the first half confirmed 9% year-on-year development. Funds from operations grew by the identical quantity.

For now, it’s onerous to say with confidence what the short-term demand image seems to be like and what which means for pricing.

Over the medium to long run, nonetheless, I count on demand and subsequently pricing to develop. That must be good for revenues and particularly profitability at Glencore, which like most miners has excessive fastened prices.

Share price might nonetheless go both method

If that occurs, I believe it may very well be excellent information for the Glencore share price. It’s 30% decrease than at the beginning of final 12 months. Robust pricing might assist push up earnings and I reckon the share price would observe.

The market cap is at present barely lower than £50bn. That’s barely thrice the corporate’s post-tax earnings final 12 months.

If pricing corporations and earnings soar, the present valuation might look very low-cost on reflection.

Trying from the opposite facet of issues, although, final 12 months’s efficiency appears distinctive. There’s a purpose post-tax earnings fell four-fifths this 12 months. It demonstrates simply how turbulent the marketplace for pure assets could be. In itself that deserves a reduction within the share price.

Not solely that, however issues might worsen from right here.

In spite of everything, whereas many economies are performing weakly, they don’t seem to be really in recession. A full-blown world recession – not to mention melancholy – may very well be very unhealthy information for useful resource costs and with them, the Glencore share price.

Why I’m ready

The truth is, that explains why I’ve no plans to spend money on Glencore (or any mining firms) for now.

I believe the share price might increase sooner or later however that may very well be years – perhaps a few years – sooner or later.

As soon as the economic system is on firmer floor and we’re extra clearly in an upward swing within the financial cycle, I might think about shopping for into Glencore. For now, although, I really feel I see higher worth in different sectors.