Freeport-McMoRan (FCX) closed at $9.71 per share on August 20. The stock has now traded below the psychologically crucial level of $10 per share for the last few trading sessions. In our previous series, we noted that copper demand indicators in the US market (SPY) are strong. However, when commodity prices crash—like we’ve seen this year—there’s little that any company in the metals and mining space (XME) can do.
Share prices of mining companies including Teck Resources (TCK) and BHP Billiton (BHP) continue to sag near their 52-week lows. Freeport-McMoRan has been one of the worst-affected companies in this meltdown in metal shares. Its share price has fallen ~60% since the beginning of 2015, as you can see in the chart above.
Why is Freeport-McMoRan’s share price falling?
Freeport-McMoRan’s share price has been falling for multiple reasons. Prices of crude oil and copper, which are two major commodities that the company sells, are trading at prices last seen during the global financial crisis of 2008–2009. Falling commodity prices have taken their toll on share prices for all mining companies.
For Freeport-McMoRan, the worry has only exacerbated due to the company’s huge debt pile. The company borrowed heavily in 2013 for its energy foray. However, things didn’t exactly shape up the way it wanted. Crude oil prices have tumbled over the last nine months, negatively affecting Freeport-McMoRan.
In this series, we’ll analyze the recent movement in copper and energy prices. We’ll also explore how the Chinese copper industry has been doing lately.
Let’s begin by looking at the recent trend in copper prices in the next part of this series.