Commodity Price Update: Iluka, Glencore, Whitehaven, and New Hope Are Cheap

Higher US tariffs could lead to slower economic growth and recession, reducing near-term commodity demand. Shares of our non-gold mining coverage are materially lower on last quarter, led by base metals and coal miners.

Why it matters: After recently updating our assumed gold prices, we now update our other commodity price assumptions. These are our current best estimates, but we note that prices could change materially from our updated assumptions, especially if tariffs are postponed or reduced.

• Prices and currencies have been even more volatile than usual in the wake of US tariffs announced April 2. Investors are responding to each announcement—and rumor—regarding tariffs, as well as to the responses of the countries most affected, led by China.
• But mining is a margin business. While commodities are generally priced in US dollars, much of the effect of price changes is likely to be offset by movements in input costs and producer country currencies moving against the US dollar.

The bottom line: New Hope’s fair value estimate falls 7% on lower thermal coal prices, which along with weaker metallurgical coal prices also drive Whitehaven’s and Glencore’s fair value estimates down 6%. All three companies appear cheap.

• Weaker aluminum and alumina prices drive South32’s fair value estimate lower by 6%. Higher copper prices see our fair value estimates for Teck and Freeport-McMoRan rise 3% and 4%, respectively.
• Our fair values for BHP, Rio Tinto, Fortescue, Vale, Anglo American, Mineral Resources, and Deterra are unchanged on modestly lower iron ore prices. Our Iluka estimate is also unchanged.

Big picture: Mineral Resources trades at 25% of our fair value estimate and is the cheapest of our non-lithium-focused mining coverage. Iluka shares are 62% below our estimate, while Glencore and Whitehaven trade 48% and 47% below fair value, respectively.