Glencore PLC (LSE:GLEN) is the best pick in the mining sector heading into 2023, according to Deutsche Bank, which expects a shortage of battery metals to come to a head over the next twelve months.
“There is not enough supply to meet future energy transition-related demand,” said the bank's analysts in a note, highlighting the FTSE 100's group's cobalt division.
“Production growth has ground to a halt over the past three years and when global demand turns back up, the market will again be faced with low inventories, inelastic supply and incentive level prices," they said.
Even so, demand and macro risks are high, the analysts added, so, on a six-12 month horizon, it prefers strong free cash flows, growth kickers and self-help catalysts and on this basis and potential returns Glencore stands out among the UK-listed companies.
The Deutsche Bank analysts said while Glencore's marketing and coal arms have delivered record earnings this year, there is longer-term value in base metals and from the final disposals of non-core assets such as Viterra (TSX:VT).
Deutsche Bank's target price for Glencore rises to 560p, from 500p, and 'buy' is its rating.