Freeport-McMoRan Inc (NYSE:FCX) is considered as one of the largest producers of copper in the world. Even though it has diversified into other businesses lately, but copper remains its mainstream business. As per the reports, the prices of copper have fallen significantly in the last one year; hence, the revenue of Freeport has affected badly.
Copper Price Trend in London Metal Exchange:
Even after diversifying its businesses into gas and oil in 2013, sale of copper covers more than 60% of total proceeds. It’s the primary reason behind the overdependence of Freeport’s fortune on how copper performs in the international market. If one takes into consideration the prices of copper in the last few year, he can easily determine that they have fallen significantly. For instance, copper prices in London Metal Exchange were $5,800 per ton on an average in 1Q2015 as compared to $7,100 per ton in 1Q2014.
Copper is used in different industries for different activities including consumer products, construction work and different activities in the power sector. China is the largest copper importer of the world with close to 40% demand of the copper comes from China. But the recent sluggishness in its economy has affected the application of copper in the country. Due to less demand, prices have automatically fallen in China, which have affected the copper prices in the international market.
The Chinese economic prospects have not been up to the mark over the last few months. Manufacturing Purchasing Managers’ Index has captured these sluggish prospects. It measures the business conditions in any country’s manufacturing sector. When PMI goes past 50 points, it indicates solid business activities, but a level below 50 points represents contraction. China’s PMI as per the information given by National Bureau of Statistics remained 50.1 in March, but below 50 points for January and February.
