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Freeport-McMoRan’s shares suffered a setback recently, but they continue to recover.
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That’s thanks to an exciting leaching technology and multiple expansion project opportunities.
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The possibility of increased demand for U.S. refined copper should also support Freeport’s growth.
The share price of America’s leading copper company, Freeport-McMoRan (NYSE: FCX), has been volatile recently, even falling sharply at the end of July after the Trump administration’s tariff actions left copper speculators disappointed. However, the stock has recovered since then, and there’s likely more to come for long-term investors. Here’s why.
Copper speculators spent the first half of the year debating whether President Trump’s tariffs, as expected, would include 50% tariffs on refined copper. The fear of such created a significant premium for U.S. copper, priced on the Commodity Exchange (COMEX) and the international price of copper on the London Metal Exchange (LME).
Discussing the matter in late July, Freeport-McMoRan CEO Kathleen Quirk noted that “as of yesterday’s close, the U.S. premium approximates per pound or about 28% above the LME price. This implies an approximate $1.7 billion annual financial benefit on Freeport’s U.S. sales.”
The company is a major beneficiary of higher COMEX prices because, according to Chairman Richard Adkerson, “We are the dominant producer in the U.S. producing over 70% of the country’s refined copper, we’re fully integrated.”
In the end, the Trump administration placed tariffs on semi-finished goods (wire, pipes, etc) but excluded refined copper. The decision caused the COMEX-to-LME premium to collapse, and disappointed Freeport-McMoRan investors hoping for an extended period of super profits for the company.
Still, there are five reasons why investors should use this period of weakness to buy into the stock.
First, while copper still has highly cyclical demand driven by its sensitivity to the economy due to its widespread use in industry (construction, electricity, transportation, etc), there’s an increasing element of underlying growth in demand coming from the electrification of everything (electric vehicles, data centers, Internet of Things, etc).
That argument is strengthened by booming investment in data centers, and the electricity (including transmission and distribution) needed to power them, as well as ongoing growth in electric vehicle (EV) and hybrid sales, while sales of internal combustion engines (which use significantly less copper) remain weak.
