Sector: Basic Materials | Industry: Other Industrial Metals & Mining | Website: https://www.south32.net
Commodity Analysis
Profits for S32 were generated from the following commodities in 2024:
In their latest quarterly result, S32 received higher prices for most of their commodities:
In January trends have remained overall favourable:
Aluminium – having a very strong start to the year
Copper – also a strong start to the year, despite the falls of the last two days.
Silver
Zinc – a lot of these charts look similar, bouncing to start the year.
Lead – while the chart is ugly, it’s up for January
Manganese – like lead, ugly chart but up to start the year
Coal – the one drag at present
Broker Positioning
Market forecasts are for a return to growth in 2025 and 2026. These numbers can change quickly though. If the moves in the commodities as shown above continue, analysts will need to update their numbers which could see some upgrades come through.
Valuation Model
Valuation is a tricky game with highly cyclical companies like S32. Nevertheless, my model suggest there is some value at present in S32 with a reasonable margin of safety.
Technical Analysis
The price chart shows a decline from recent highs throughout November on lower than normal volume. This is consistent with the fall in many of their commodities during the same period. Prices have started to move higher in January and the commodity charts above support this. The 3EMA have not crossed as yet but look poised to do so. The only ingredient missing so far is an increase in volume.
Short positions have been falling since the middle of last-year. This perhaps suggests that the short-sellers believe the worst is over for S32.
Final Word
S32’s performance in early 2024 has been influenced by favourable trends across most of its key commodities, with aluminium and copper leading the way, while coal remains a drag. Market forecasts anticipate a return to growth in the coming years, though these projections are subject to change based on commodity price movements. From a valuation perspective, the company appears to offer some margin of safety despite the cyclical nature of its business. Technically, the stock has shown early signs of recovery in January, though a confirmed upward trend may require stronger volume. Additionally, the decline in short positions since mid-2023 suggests improving sentiment among investors.
Disclaimer: This information is provided purely for educational purposes. It takes no account of an individual’s personal financial circumstances and hence can in no way constitute financial advice. The above data may be subject to errors or inconsistencies for which the author takes no liability. It is imperative that all investors do their own research or if they need advice, seek it from a qualified financial adviser.
Cutting Through The Noise: ASX:S32