Anglo American has seen its share price plummet by 50% since April 2022, a stark contrast to the 12% decrease in the MSCI World Metals and Mining index over the same timeframe. The company has been grappling with the decline in platinum group metals (PGM) prices, largely due to its stake in Anglo American Platinum, the world’s largest platinum producer. Despite efforts to mitigate the impact, PGMs still accounted for 12% of the group’s cash profits in 2023, down from 30% the year before.
The global automotive industry’s struggles have further exacerbated Anglo’s woes, as automakers have surplus PGM inventories due to the pandemic and semiconductor shortage disruptions. Despite a rebound in demand, excess inventory remains a challenge to work through. This, coupled with supply shortages, has led to a decline in PGM prices, a situation that industry experts believe will eventually reverse as supplies tighten and demand rises.
In response to these challenges, Anglo has announced production cuts and cost-saving measures, including potential job losses and contract reviews. The mining industry in South Africa is also facing similar struggles, with falling commodity prices and operational difficulties leading to job cuts and investment freezes. The upcoming election in South Africa adds a political dimension to these challenges, as the ruling ANC faces potential losses and concerns over mining policy changes.
Despite these setbacks, Anglo could potentially benefit from the rising copper prices and a potential reversal in interest rates, which could boost industrial metals demand. M&A activity in the sector may also increase as financing costs lower, providing a potential lifeline for companies like Anglo American. Despite the current challenges, there may be opportunities for the company to navigate its way back to success.
