Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Copper Has Lots Of Upside. Ride Its Bull Market With Freeport-McMoRan Stock

By Andy HechtStock MarketsNov 23, 2021 07:45AM ET
www.investing.com/analysis/copper-has-lots-of-upside-ride-its-bull-market-with-freeportmcmoran-stock-200609215
Copper Has Lots Of Upside. Ride Its Bull Market With Freeport-McMoRan Stock
By Andy Hecht   |  Nov 23, 2021 07:45AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

This article was written exclusively for Investing.com

  • The “new oil” is critical for decarbonization
  • Almost a decade to bring new production online; inventories are dropping
  • Leading copper producers scouring the earth for reserves and production
  • FCX: leading producer of copper, gold, molybdenum
  • Levels to watch in FCX shares

Copper is an essential, nonferrous metal building block for infrastructure worldwide. China is the world’s leading copper consumer, but the US has just passed an infrastructure rebuilding package which will require lots of the red metal over the coming years.

Indeed, copper is more than a metal—it's a global barometer for economic expansion or contraction. Many market participants have nicknamed the commodity Dr. Copper, as the industrial metal diagnoses economic conditions. While inflationary pressures pushed copper’s price to a new record high at nearly $4.90 per pound in May, prospects remain strong for a substantial increase in demand over the coming years. Freeport-McMoran (NYSE:FCX) is a leading copper producer that should continue to trend higher alongside the red base metal.

The “new oil” is critical for decarbonization

While copper was on its way to new highs in May, Goldman Sachs called the red metal “the new oil.” The investment firm said that decarbonization does not occur without additional copper supplies.

The base metal is a crucial component in EVs, wind turbines, and other technological advances that decrease fossil fuel consumption and favor alternative and renewable energy.

Copper Quarterly 1990-2021
Copper Quarterly 1990-2021

Source: CQG

The quarterly chart, above, shows that COMEX copper futures rose to a high at $4.8985 per pound, surpassing the 2011 $4.6495 peak.

Copper Monthly 2002-2021
Copper Monthly 2002-2021

Source: Barchart

Three-month copper forwards on the London Metals Exchange rose to $10,747.50 per metric ton. Goldman forecast the price would increase to the $15,000 per ton level by 2025, with other analysts calling for even higher prices.

At $15,000 per ton, COMEX copper futures would be north of the $6.80 per pound level, leaving lots of upside room for the red metal.

Almost a decade to bring new production online; inventories are dropping

When commodity demand rises, producers increase output to meet the escalating requirements. At the same time, it's impossible to turn on new production overnight. New mines can take eight to ten years to yield the copper ore that becomes the metal.

Over the past months, China, the world’s leading copper buyer, attempted to temper the rally by selling their strategic stockpiles. While copper has not made a new high, the price has remained above the $4 per pound level.

The price action during four auctions where China sold copper, aluminum, and zinc, as well as other commodities, has been bullish. While copper’s price touched a new record, it hasn't declined under the weight of the sales either.

Meanwhile, copper inventories in London Metal Exchange warehouses worldwide have been falling.

1Y LME Copper Warehouse Stocks Level
1Y LME Copper Warehouse Stocks Level

Source: LME/Kitco

The chart shows that after reaching a high of over 255,000 metric tons in August 2021, copper stockpiles were at the 89,875-ton level at the end of last week. The decline is a sign of rising demand for the red metal.

Leading copper producers scouring the earth for reserves and production

The world’s leading copper producers are scrambling to identify new supplies. BHP Billiton (NYSE:BHP), a leading, global diversified producer, had 1.72 million tons of copper output in 2020, second only to Codelco, the Chilean mining giant that produced 1.73 million tons.

BHP is currently looking at copper projects in the Democratic Republic of Congo (DRC) to increase its output. The DRC is a challenging mining jurisdiction because of its long history of corruption. BHP’s move to even consider a DRC project signifies that producers are starving for more copper supplies.

The third leading global producer is Freeport-McMoRan, with 1.45 million tons of copper output in 2020.

FCX: leading producer of copper, gold, molybdenum

Aside from copper, FCX also produces molybdenum and gold and is the world’s leading molybdenum producer. FCX’s primary mining interests include the Grasberg copper-gold deposit in Indonesia, the world’s biggest gold mine.

FCX also operates the Morenci mine in Arizona in the US, one of the leading copper deposits in North America. Freeport also operates two copper-producing mines in South America, Cerro Verde in Peru and El Abra in Chile.

Levels to watch in FCX shares

At the $38 per share level at the end of last week, FCX had an over $56.2 billion market cap. The stock trades an average of over 18 million shares each day. The $0.30 dividend translates to a 0.79% yield.

Source: Yahoo Finance

The chart shows the bullish trend in FCX’s earnings as it met or exceeded EPS forecasts over the past four consecutive quarters.

A survey of 21 analysts on Investing.com has an Outperform rating on the stock.

FCX Consensus Estimates
FCX Consensus Estimates

Chart: Investing.com

As well, among those polled there's an average price target of $42.33 for FCX shares for a 12.15% upside with projections ranging from $28 to $50 per share.

FCX Monthly
FCX Monthly

Source: Barchart

The chart above shows that FCX shares rose from lows of $4.82 in March 2020 during the height of the pandemic to the most recent high at $46.10 in May 2021, when copper reached its all-time peak.

If Goldman Sachs and other analysts are correct and copper is heading towards the $15,000 per ton level, FCX shares could challenge the 2011 and 2008 highs at $61.34 and $63.63 per share respectively. At below $40 currently, FCX correlates well with copper and could experience explosive growth over the coming years.

Bull markets rarely move in straight lines. Corrections can be brutal, shaking the faith of the most committed bulls.

However, in this case, I view corrections and price weakness as a buying opportunity for FCX, the third leading copper producer worldwide, which will continue to profit as the price of the red metal rises over the coming years.

Copper Has Lots Of Upside. Ride Its Bull Market With Freeport-McMoRan Stock
 

Related Articles

Copper Has Lots Of Upside. Ride Its Bull Market With Freeport-McMoRan Stock

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
Stephen Fa
Stephen Fa Nov 24, 2021 1:41PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
solid bet
Sadiiq Samriye
Sadiiq Samriye Nov 23, 2021 11:23AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
fine
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email