Despite falling commodity prices, Glencore’s IPO is still set to be a blockbuster

By IBISWorld Energy Analyst Justin Molavi


Glencore’s IPO marks its feeling that the commodity market has already hit its peak and that it's time to cash in. This forecast comes on the back of the IMF downgrading GDP forecasts for the US and other developed economies as consumers pull back spending amid higher prices for energy and food.

What does this mean for energy markets in the US ?
Glencore’s IPO marks the beginning of the end of incessant energy price increases. With the dying down of political tensions (for the most part) in the Middle East and gasoline demand falling in the US, crude oil and other commodities have declined from their highs during the first quarter of the year. However, this does not necessarily mean prices are going to drop dramatically because emerging economies like China are still demanding energy at increasing rates and QE2 is still pushing the value of the dollar lower. As such, energy prices will stay elevated as China continues to provide a floor on energy demand. Crude oil prices are likely to stay above $90 a barrel throughout 2011.

Glencore operates in a variety of growing industries, and its IPO is a testament of US industry growth expectations over the next five years. The Oil Drilling and Natural Gas Extraction industry is anticipated to grow 5.5% annually to $432.0 billion in the five years to 2016. Mining Services in the US is expected to grow 3.8% annually to $95.9 billion in the five years to 2015. Crop Services are also projected to increase 3.7% annually to $16.1 billion in the five years to 2015.