Are Markets Still a Little Bearish on Freeport?
Freeport-McMoRan (FCX) is expected to post adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $4.9 billion this year and $6.3 billion next year.
Copper prices have reacted to fluctuations in inventory levels over the last few quarters.
Moderation in Chinese copper demand is a risk for copper prices, though copper could find some support from supply-side factors.
One of the factors that has supported commodity prices from copper to aluminum this year has been better-than-expected demand in China.
Copper prices have shown strength over the last few trading sessions, which has helped the upwards price action of miners including Freeport-McMoRan (FCX), Glencore (GLNCY), and Southern Copper (SCCO).
The US dollar has shown weakness, which is impacting commodity prices.
The LME (London Metals Exchange) three-month copper contract has now closed above the $6,000 per metric ton price level for 19 consecutive trading sessions.
Freeport-McMoRan (FCX) closed at $14.77 on August 16, gaining 5.7% from its previous close. The stock has been consolidating over the last few trading sessions.
Overall, fertilizer companies’ gross margins failed to impress investors, and future prospects for the phosphate segment remain bleak as of mid-August.
Unlike potash shipments, phosphate shipments for major North American companies in 2Q17 remained weak.
The weakness in phosphate prices resulted from weak demand and capacity pressures.
Given the growth in potash shipments and the increase in price realization, it’s natural that the margins of potash producers improved YoY in 2Q17.
Potash fertilizers have had a better run than nitrogen fertilizers so far this year.
Unlike nitrogen prices, potash prices were broadly higher on a YoY (year-over-year) basis in 2Q17.
Calendar 2Q17 remained subdued for the nitrogen fertilizer pricing environment. Cheap energy costs have driven capacity buildups and flattened the cost curve.
It’s not surprising that nitrogen producers’ margins contracted in 2Q17.
Nitrogen shipments saw a median YoY (year-over-year) growth of 1% to 8.2 million metric tons in 2Q17.
For many companies, the shipment volumes for fertilizers saw modest growth YoY in 2Q17, but an extended weakness in price realization offsets growth in shipments.
Overall, fertilizer companies saw lackluster earnings in 2Q17, much of which came from the ongoing weakness in fertilizer prices.
At 7:15 AM EST on August 17, the WTI crude oil futures contracts for September 2017 delivery were trading at $46.66 per barrel—a fall of ~0.26%.