Freeport-McMoRan (FCX), the leading US-based copper miner, fell 2.7% yesterday. This fall took its March losses to 4.5%. However, the stock is still up 20% year-to-date. Southern Copper (SCCO), Rio Tinto (RIO), and BHP Billiton (BHP) have risen 23.7%, 24.4%, and 15.1%, respectively, this year.
Freeport is a pure-play copper miner, and its fortunes are closely tied to copper prices. Copper prices have been largely rangebound over the last few weeks. Copper is caught in a tussle between bulls and bears. While bears think China’s slowdown will hurt copper prices, bulls point to the positive supply-side fundamentals. We should remember that copper markets are expected to enter into a structural supply deficit as global mined copper production is not expected to keep pace with demand growth.
Demand tends to be a bigger price driver, especially in scenarios like we currently have. China is the world’s biggest consumer of metals, and even a hint of a slowdown in the Chinese economy sends metal prices into a tailspin, copper being no exception. This month, China’s economic data including auto sales and industrial production have disappointed markets. China’s February trade data also spooked investors, as its exports in US dollar terms fell 20.7%, while its imports fell 5.2% YoY.
However, China’s copper imports sent mixed signals. While its unwrought copper imports fell 11.6% YoY, copper ore and concentrate imports rose 33.1%. Read China’s February Trade Data Compounded Slowdown Fears for a detailed analysis of China’s February trade data.