Freeport-McMoRan: The Year in Review
Freeport-McMoRan (NYSE:FCX) Inc. witnessed a volatility in its business prospects over the course of 2017, as indicated by the stock price movement of the company. The stock price tumbled in mid 2017 before gaining momentum at the end of the year.
(Source: NASDAQ)
Most of this volatility was driven by the sharp contrast in the movement of global copper prices and the stability in the company. In this article, we will look back at the notable developments of the year for Freeport-McMoRan and briefly look ahead to what the next year holds for the company.
- Will Freeport Stock Recover To Pre-Inflation Shock Highs Of $52 Per Share?
- What To Expect From Freeport’s Q2 Results
- How Is Freeport Stock Faring Amid Volatile Copper Prices?
- Copper Prices Have Recovered A Bit. Is Freeport Stock Worth A Look?
- Lower Copper Prices Will Weigh On Freeport’s Q3 Results
- What’s Happening With Freeport-McMoRan Stock?
Improved Copper Pricing Environment
Copper has been trading at its 3-year high levels as the deficit between copper demand and supply has widened this year. The deficit is mainly driven by Chinese environmental curtailments initiated in the country which has substituted the economy’s demand from scrap copper to high grade copper, which is mostly imported. In addition to that, improved global economic conditions, especially in the manufacturing sector, has also supported the increase in demand for copper. As per analysts estimation, an additional 5 million tons of copper projects would be required to sustain the copper demand over the next 10 years. [1] However, global supply remains continuously under pressure with current mines nearing exhaustion and the absence of near term successful expansion projects adding to concerns. Freeport experienced a 29% increase in its average realized copper price per pound in the first 9 months of the year, compared to the same period last year.
(Copper Spot Price, Source: LME)
Uncertainty in Indonesia Impacted Shipments
Although copper prices are trading at their all time highs, Freeport has not been able to take full advantage of the higher pricing environment. The company has been engaged in a series of negotiations with the Indonesian government over the terms governing the company’s operations in the country over the long term. Freeport resumed exports of copper concentrate from Indonesia in April on a temporary six-moth permit, after regulatory changes to the country’s mining regime had forced the company to stop exports in January. This permit was further extended in October along with a new proposed framework of agreement which is yet to take a formal ground. [2]
In the meantime, the company’s Indonesian mining operations have also been negatively impacted by worker absenteeism and separatist violence. [3] These prevalent disruptions in Indonesia have led to a fall in its shipment volume by 14% for the first 9 months of 2017, compared to the same period last year and hence has hindered the company from taking complete advantage of the rise in copper prices.
The country is set to finalize its agreement with Freeport by Q1 2018, which has led to the recent rally in its stock price. [4] The finalization of this agreement would lead to greater stability for the company and enable it to earn higher revenue through higher copper prices in the upcoming year.
- Will Freeport Be Able to Take Advantage of Elevated Copper Prices in Q4?
- What Factors have Led to the Recent Fall in Copper Prices?
Notes:
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- Freeport-McMoRan (FCX) Q3 2017 Results – Earnings Call Transcript, Seeking Alpha [↩]
- Freeport-McMoRan Announces Framework For Agreement With Indonesian Government Regarding Long-Term Operating Rights For PT Freeport Indonesia, Freeport News Release [↩]
- Freeport-McMoRan’s Q2 2017 Earnings Call Transcript, Seeking Alpha [↩]
- Indonesia, Freeport Near New Deal for Giant Copper Mine, Bloomberg [↩]