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Monitoring the Blowback of Falling Base Metal Prices after November 5

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Pressure on mining companies

On November 5, the fall in the price of base metals resulted in a weak performance from major base metal mining companies. The US dollar, which was strengthened by Fed Chair Janet Yellen’s comments on a potential interest rate hike in December, helped drag base metal prices down on November 5.

Meanwhile, the slowing Chinese economy has been keeping the base metal prices low. The potential interest rate hike would likely impact copper prices significantly as the stronger US dollar makes base metals expensive.

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Anglo American’s all-time low

On November 5, multinational mining company Anglo American (AAUKY) fell hardest among peers, plunging by 8% and closing the day at $4.03. This is the all-time lowest price level of Anglo American. The fall of copper prices to a five-week low on November 5 helped push Anglo American’s stock to this all-time low. As the above graph shows, since the beginning of 2015, the equity prices of Anglo American have fallen by 55% as of November 6 due to the slump in base metal prices.

Other stock reactions to base metal lows

Freeport-McMoRan (FCX) fell by 4.7% on November 5, closing the day at $11.48. The 2.4% fall in copper on the same day weakened the sentiment on Freeport. Between November 2 and November 6, FCX fell by 2.5%.

Meanwhile, Alcoa (AA), one of the largest producers of aluminum in the world, fell by 1.9%, closing at $.9.2 on November 5. In a press release on the same day, Alcoa announced its plans to close its East plant in Massena as well as its decision to lay off 500 employees.

These falling base metal prices impacted major base metal-based ETFs like the SPDR S&P Metals & Mining ETF (XME) and the Powershares DB Base Metals Fund (DBB) on November 5. The SPDR S&P Metals & Mining ETF (XME) fell by 2.9% on the same day as well, closing at $17.2.

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