Exploring Freeport-McMoRan’s Indelible Infrastructure
Freeport-McMoRan (NYSE:FCX), a captivating figure in the basic materials sphere, has long captivated market observers with its foothold in the copper mining industry. Hailing from Phoenix, Arizona, the company not only stands as one of the world’s largest copper miners but also serves as a pivotal economic barometer due to the cyclical nature of copper prices.
My interest in this company spans many years, with my most recent article dating back to October 2, in which I extolled the company’s enduring strength in the face of short-term hurdles.
Since then, FCX shares have outperformed the S&P 500, climbing 13%.
In this article, I’ll update my bullish take, leveraging recent developments in the copper industry and the company’s internal enhancements to fuel future growth.
So, without further ado, let’s dive in!
The Pinnacle of Copper
Post-Christmas, copper surged to its highest price since August, with subsequent gains partially reversed.
On December 27, Bloomberg reported that base metals, including copper, charted upward momentum driven by optimism around potential Federal Reserve monetary policy easing.
The global copper supply, as per Bloomberg, appears to be dwindling, with the anticipated surplus for 2024 rapidly shrinking.
Initial projections of a copper oversupply have been whittled down, primarily due to supply chain vulnerabilities stemming from issues like political resistance, social unrest, and operational setbacks.
In late November/early December, one of the world’s largest copper mines shuttered due to intense public protests.
Moreover, operational hurdles prompted a leading mining company to slash its production estimates, erasing roughly 600,000 tons of anticipated copper supply and potentially reshaping the market from forecasted surplus to equilibrium or even deficit.
Consequently, industry analysts now anticipate a small deficit in refined copper for the upcoming year, a stark departure from previous projections.
The market’s tepid response to supply disruptions belies the potential impact of a demand resurgence, underscoring the latent long-term secular tailwinds obscured by cyclical weakness.
The chart juxtaposing the ISM Manufacturing Index against COMEX Copper futures hints at a turnaround in economic growth expectations, signaled by an uptick in copper futures.
These tailwinds coalescing around copper prices have spurred even gold miners to recalibrate their focus towards copper, as substantiated by the Wall Street Journal’s report on their shift towards copper in light of the global energy transition.
The surge in gold prices has prompted major players like Newmont (NEM) and Barrick Gold (GOLD) to fortify their foothold in copper, exemplified by Newmont’s acquisition of Newcrest Mining for $15 billion and Barrick’s plans to establish a significant copper operation in Pakistan.
Unsurprisingly, this pivot reflects investors’ recognition of the burgeoning demand for
