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Why Freeport-McMoRan Is in Free Fall This Month

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Aug. 28 2019, Published 2:33 p.m. ET

  • Freeport-McMoRan stock is in free fall this month. The stock has fallen 21.3% in August and is now down 14.5% for the year.
  • China’s slowdown, the trade war’s escalation, recession fears, and Indonesian issues have hit Freeport-McMoRan.
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Freeport-McMoRan stock

Freeport-McMoRan (FCX) stock is down 21.3% this month based on yesterday’s closing price. There’s been a bloodbath in the entire metals and mining space this month, but Freeport is also underperforming other copper miners. Southern Copper (SCCO) is down 14.6% so far in August. FCX hit a three-year low yesterday. Copper prices are also down this month. COMEX copper has fallen 2.7% in August. Let’s see what’s weighing heavy on FCX this month.

Recession fears

Global economic data has been soft this month—China’s economic data in particular. China is the world’s biggest copper consumer. Its industrial production growth fell to multiyear lows in July. Meanwhile, China’s copper imports, which are seen as a proxy for its copper demand, show a mixed picture. China’s unwrought copper imports have fallen year-over-year for six consecutive months. However, its copper ore and concentrate imports rose to a record high in July. With that said, its copper ore imports fell sharply in June.

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Nonetheless, trade war fears and the yield curve’s inversion have sparked recession fears. Geopolitical developments also affect copper prices. Some analysts see copper prices as a reflection of the global economy. Rising recession fears have taken a toll on all metals and mining stocks, FCX being no exception.

Freeport-McMoRan’s Indonesia issues

Freeport-McMoRan operates the giant Grasberg copper and gold mine in Indonesia. The mine is situated in Indonesia’s Papua province, which is currently seeing violent protests. Reuters reported that Riza Pratama, Freeport’s Indonesia spokesman, said, “Freeport operations were not disturbed but the company said it was advising employees and their family members to limit unnecessary travel.” Nonetheless, the Papua protests could also be affecting Freeport-McMoRan’s stock price.

Freeport has received “buy” or higher ratings from seven analysts, while the remaining 13 polled by Thomson Reuters have rated it as a “hold” or some equivalent. The stock’s mean consensus price target of $13.29 represents a potential upside of almost 53% over its current price. Earlier this month, Jefferies and Citi lowered Freeport-McMoRan’s target price.

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