Glencore Leads Mining Stocks Lower on China Concerns -- Update

By Alex MacDonald 

LONDON--The share price of commodities giant Glencore PLC fell below GBP1 ($1.55) for the first time ever Tuesday, leading all the U.K.-listed global mining stocks lower on continued fears that China's economic slowdown would cause metal prices to tumble further.

Shares in the Swiss trader and producer Glencore fell to a new intraday low of 99.6 pence a share, down more than 16% on the day, making it the worst performer in the U.K.'s FTSE 100 index. The company's price later climbed above GBP1.

U.K.-listed Anglo American PLC was the second-worst performer, falling 8.4%, while Anglo-Australian miners BHP Billiton Ltd. and Rio Tinto PLC ranked among the 10 biggest decliners, each down about 4.8% and 3.9%, respectively.

Glencore has been the worst performer of U.K.-listed miners this year as it seeks to reduce its heavy debt burden, among the largest in the industry, to safeguard its credit ratings. Glencore's shares are down nearly two thirds since the beginning of the year and are down more 80% since the company's London share listing in 2011.

The company issued $2.5 billion in new shares last week and announced a host of cost cuts, asset sales and other measures to restore investors' faith--to no avail so far, analysts say.

"Glencore has suffered a complete loss of confidence from investors," Credit Suisse said in a note to clients on Tuesday. However, the company's stock could rebound, the bank said, if it delivers on its second-half earnings targets.

Credit Suisse on Tuesday slashed earnings estimates across the mining sector. Miners have been roiled by a long rout in commodities prices, with gold, copper and iron ore trading at multiyear lows in recent weeks. The copper price, Glencore's largest earnings driver, led the base metals complex lower in afternoon European trading, falling 2.9% to $5,103 a ton. Meanwhile the price of zinc, the company's third largest earnings contributor in the first half of this year after coal, fell to more than six-year low of $1,640 a ton on Tuesday.

"Until China demand and emerging market currencies find a floor, it will remain challenging to put an absolute floor on commodity prices," Credit Suisse said in a note.

The 6.2% drop in the FTSE 350 mining index and 2.4% drop in the FTSE 100 index extended a pattern of market volatility since the U.S. Federal Reserve said on Thursday it wasn't raising interest rates this month. The Fed's decision sparked renewed fears over the sluggish pace of global growth and has left investors second-guessing when the first rate move will come.

Credit-ratings firm Moody's Investors Service said on Tuesday that miners are likely be the hardest hit of any sector in Europe, the Middle East and Africa as a result of China's economic slowdown.

It estimates about 20%-30% of EMEA mining output, in terms of revenue, is exported to China both directly and indirectly, the highest of all sectors.

Analysts were struggling to explain why Glencore's stock had fallen so much more than others, except to note that funds are likely short selling the stock in greater numbers.

"It's too big a move," said Liberum Capital analyst Ben Davis. "This feels more technically driven than fundamentals [driven]."

Tommy Stubbington in London contributed to this article.

Write to Alex MacDonald at [e-mail]

(END) Dow Jones Newswires

September 22, 2015 11:10 ET (15:10 GMT)

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