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Freeport Stock Is Soaring—And Not Just on the Trump Effect

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Dec. 20 2016, Updated 1:05 p.m. ET

Trump effect

Copper prices have gained ~20% YTD (year-to-date), with sentiments improving considerably since the beginning of the year, when prices looked set to breach their 2009 lows. Copper prices certainly rose after Donald Trump won the US Presidential election, but we were seeing copper prices gain in strength even before the election. Still, Copper producers (BHP) including Freeport-McMoRan (FCX), Southern Copper (SCCO), Teck Resources (TCK), and Glencore (GLNCY) had been trading in a narrow price channel for months until the post-election rally moved these stocks toward higher price levels.

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Key drivers

During his campaign, Trump said that he intended to spend more than $500 billion—twice what Hillary Clinton was promising to allocate—on the infrastructure sector. We should note that investments in highways and bridges will boost cement and steel demand and generate some incremental copper demand. If we see a doubling of US economic growth, as Trump promised in his speeches, US copper demand will likely get a boost.

Higher energy prices

Meanwhile, the recent stability in crude oil prices has been supporting copper prices as well. Higher crude oil prices have lifted market sentiments and helped other commodities move to higher price levels.

Expectations of better-than-expected demand from China have also been supporting copper prices. China’s metal demand found support from the stimulus provided by the Chinese government earlier this year.

In the next few articles of this series, we’ll explore how China’s copper demand could play out in 2017. But continue to the next part for a look at what supply-side factors, in particular, are doing to support copper prices right now.

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