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Why Freeport Expects Its Copper Shipments to Fall in 2017

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Freeport’s copper shipments

It’s important for investors in the metals and mining space to follow quarterly production and shipment data. Mining companies’ revenues are functions of commodity prices and shipments.

Miners don’t have pricing power due to the commoditized nature of their businesses. So, changes in shipments tend to determine how one company’s revenue changes compared to the others. We can also gain crucial insight into the market’s demand-supply balance by looking at major producers’ production figures. In this article, we’ll look at Freeport-McMoRan’s (FCX) 2016 shipments and the 2017 guidance provided by the company.

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2016 shipments

Freeport sold 4.7 billion pounds of copper, 1.1 million ounces of gold, and 74 million pounds of molybdenum in 2016. In contrast, the company sold 4.1 billion pounds of copper, 1.3 million ounces of gold, and 89 million pounds of molybdenum in 2015.

As we can see, the company reported lower gold and molybdenum shipments in 2016, while its copper shipments rose year-over-year (or YoY) in 2016.

2017 guidance

This year, Freeport expects to ship 4.1 billion pounds of copper, 2.2 million ounces of gold, and 92 million pounds of molybdenum. The company expects its gold and molybdenum production to rise YoY, and it expects its copper shipments to fall.

Freeport’s lower expected 2017 copper shipments will mainly be the result of the asset sales the company completed last year. Other copper miners (XLB) such as BHP Billiton (BHP), Rio Tinto (RIO), and Teck Resources (TCK) also took several measures to address their leverage ratios last year.

We’ll look at Freeport’s leverage ratios later in this series. Before that, in the next article, we’ll look at the risks to Freeport’s 2017 guidance.

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