Why Shares in Freeport-McMoRan Soared in January
Shares in copper miner Freeport-McMoRan (NYSE: FCX) rose 17.4% in January, according to data from S&P Global Market Intelligence. The move comes in line with a general increase in the S&P 500 and, more importantly for Freeport-McMoRan, an increase in the price of copper. The industrial metal's price went from around $3.80 per pound at the start of the year to a high of $4.26 per pound in late January to around $4.06 at the time of writing.
The increase in the price comes in line with a general upward move in industrial metals and raw materials, including steel, iron ore, and aluminum. There are two things to consider here. First, the general rise in industrial metals probably comes down to a renewed sense of optimism around the reopening of the economy in China and hopes that the government will stimulate the economy. The country is traditionally seen as the swing factor in pricing, not least as the country is responsible for around half of global consumption.
The second reason comes down to what Freeport-McMoRan's CEO Richard Adkerson describes as a "tight" physical market. Even back in the fall, when the price dipped to about $3.30 per pound, Adkerson described the physical market for copper as characterized by healthy demand, low inventories of copper, and producers struggling to meet their production targets. In such an environment, the spring is loaded to bounce strongly, given a change in sentiment or an increase in marginal demand.
Source Fool.com
