It hasn’t been this challenging for commodities since the great recession of 2008–2009. While copper and aluminum are still above their 2009 lows, spot steel prices in the United States have already reached their 2009 lows. Nickel has been among the worst performers, and it’s trading near 12-year lows. However, the biggest challenge is the correction in Chinese steel prices, which are now trading at the lowest levels in more than two decades.
The PowerShares DB Base Metals ETF (DBB) invests in a portfolio of commodities. It has lost ~21% year-to-date.
When commodities trade at multi-year lows, commodity stocks can’t be far behind. Freeport-McMoRan (FCX) closed at $8.10 on November 24. Although Freeport-McMoRan is marginally above its 2015 lows, it’s still down 65% year-to-date. Teck Resources (TCK) hasn’t performed any better. It’s lost 68% of its market capitalization this year. Read Freeport-McMoRan: Why the Current Rally Could be Unsustainable to learn about FCX’s long-term drivers.
Southern Copper (SCCO) and Turquoise Hill Resources (TRQ) have been better off, losing 8% and 10%, respectively, this year. Read Southern Copper: A Business Overview of a Copper Giant to learn more about SCCO.
Second leg of correction
While commodity prices have been weak for most of the year, the current correction has taken them to new 2015 lows. In this series, we’ll explore the factors driving copper prices lower. We’ll also look at the copper industry’s recent demand and supply dynamics. This should help you understand what direction copper and copper producers could take.