Freeport-McMoRan (NYSE: FCX) stock price surged sharply since the start of this month amid improvement in copper prices. The stock has recently hit a multi-year low of $8.5 due to concerns over falling copper demand.
The trade war tensions between the United States and China are negatively impacting copper prices.
Freeport-McMoRan stock price bounced close to 20% from multi year’s low that it had hit at the end of August. The stock price is currently hovering around $11, but down from 52-weeks high of $15.
The drop in FCX stock price was only due to falling copper prices. Copper price had recently hit the lowest level in the last two years. The drop is due to increasing evidence of a global slowdown along with the U.S.-China trade war tensions.
The decline in factory production in China has also been significantly impacting copper demand. China is the largest Copper importer.
Fortunately, the copper price stabilized slightly since the start of this month. Front-month Comex copper futures price stand around $2.699/lb.
“The selling has already gone a long way, but we can’t rule out the possibility copper will go lower,” Xiao Fu, head of global commodities strategy at BOCI Global Commodities UK, tells Bloomberg. “If the macro picture remains weak or we see other negative shocks coming into the picture, we could see further selloffs.”
Freeport-McMoRan stock price could also experience pressure from its financial numbers. The company had generated a Q2 revenue of $3.5 billion, down 31% from the previous year period.
Its Q2 consolidated copper sales declined 18% Y/Y. Freeport-McMoRan reported a Q2 net loss of $0.05/share compared to a net profit of $0.59/share in the year-ago period.
Due to lower copper price, FCX expects operating cash flows in the range of $1.9B for FY 2019, down significantly from previous guidance of $2.3B. The drop in cash flows could also impact its dividends and investment potential. Overall, Freeport-McMoRan stock price is likely to remain under pressure amid bleak fundamentals.