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Is Freeport-McMoRan Still A Winner?


FCX shares are on a red hot run this year due to rising copper prices and increasing copper imports in China, and there’s no doubt that the recovery will continue.

China’s copper imports increased 36% in March, while for the first quarter, imports were up 30% as the country’s growth seems to be stabilizing due to stimulus measures.

The Chinese banks have started lending more money of late and this is powering the improvement in industrial production, which is a positive for copper demand.

FCX will benefit from an improvement in prices since it will be lowering copper mining costs by 25% this year and could generate $5 billion in EBITDA at current prices.

Freeport-McMoRan (NYSE:FCX) has accelerated massively on the stock market so far this year with gains of almost 80%. This strong rally might seem implausible at first considering that economic conditions in China, which is the biggest consumer of the red metal, have been deteriorating. But, despite the challenges faced by the Chinese economy, copper prices have increased impressively so far this year and recently hit three-week highs.

Now, driven by the improvement in copper pricing, Freeport shares have received a shot in the arm as better prices will allow the company to improve its financials. As shown in the chart given below, copper prices have been on the decline in the past year, taking down Freeport's financials and stock price along with.

Copper LME Spot Price Chart

Copper LME Spot Price data by YCharts

But as copper prices have started picking up pace in the past few months, Freeport's financial position will start improving and allow the company to arrest the decline in its revenue and margins. However, before taking a...