Barclays analysts have kept faith in Glencore PLC (LSE:GLEN) after unseasonably warm weather caused excess supplies of gas and coal, driving prices down by 36% and 32% respectively.
Even if higher temperatures continue into late November, Barclays suggests that “coal burn should ramp up meaningfully into winter and we would see any weakness as an opportunity to increase exposure.”
It cited strong cash flows from non-core asset sales creating further upside potential for shareholder returns of 35% for the 2023 financial year, making it Barclay’s “top pick”.
While European countries are expected to increase investments in renewables and gas in attempts to reduce energy dependency on Russia, the results of these will take several years to appear on any substantial level, it adds.
Because of this, Barclays outlined that it expects coal to see prolonged inflated prices over the coming years, as it becomes a medium-term solution for the European energy crisis, making mining companies, like Glencore, major beneficiaries.