This is pretty well balance article, while specifically geared for Free-McMoRan - It is unusual in that it refers to all aspects of the copper equation. Supply, Demand, Inventory. I have copied it below but the pictures did not make so you may want to use the link instead.

http://marketrealist.com/2015/08/freeport-mcmoran-continues-trade-weak-investor-takeaways/

What Do Recent Copper Industry Indicators Mean? (Part 1 of 9)

Freeport-McMoRan Continues to Trade Weakly: Investor Takeaways

By Mark O'Hara • Aug 13, 2015 2:41 pm EDT

Freeport-McMoRan continues to trade weakly

Freeport-McMoRan (FCX) touched its 52-week low on August 7 before closing at $11.65—up 10.64% from the previous day’s close. Prior to this, the stock has traded weakly, reaching new lows almost every day.

Dismal Wall Street performance

The above chart shows the recent stock market performance of copper producers. Freeport has lost more than 50% since the beginning of the year. It currently trades at less than one-third of its 52-week high of $37.10 per share.

Teck Resources (TCK) has lost ~45% since the beginning of the year. Along with copper, Teck Resources is also involved in coal mining. Its coal segment has been under severe pressure on subdued Chinese demand. China’s steel demand is expected to contract this year. The slowdown in China’s steel demand has negatively impacted the fundamentals of iron ore and coal, which are used in steel production.

Southern Copper (SCCO) has bucked the trend and managed to hold relatively steady amid global commodity carnage. Its share price is down ~2% so far in 2015. This is much less than other companies in the metals and mining space (XME).

Metal shares, including Alcoa and BHP Billiton (BHP), seem to defy all laws of gravity and lift. At a time when the broader US markets (VTI) are trading near their all-time highs, metal shares seem to be headed southward.

Series overview

In this series, we’ll look at some of the key indicators that Freeport investors should track. This should help you understand where Freeport could be headed in the coming months.

Let’s begin by looking at the recent trend in copper prices in the next part of this series.

What Do Recent Copper Industry Indicators Mean? (Part 2 of 9)

Freeport-McMoRan under Pressure as Copper Prices Fall

By Mark O'Hara • Aug 13, 2015 2:43 pm EDT

Copper prices fall

Previously, we noted that Freeport-McMoRan (FCX) recently reached a new 52-week low. One of the reasons for Freeport’s dismal stock market performance is the steep correction in copper prices, which are trading near multiyear lows.

In this part, we’ll analyze the recent trend in copper prices.

Copper prices drift lower

The above chart shows the movement in spot copper prices on the LME (London Metal Exchange). They hit a fresh six-year low of $5,136 per metric ton on August 7. Copper prices are down ~20% year-to-date.

The rout isn’t limited to copper. Other base metals have also taken a beating on weak global macros. Spot aluminum prices are trading below $1,600 per metric ton while the benchmark iron ore prices recently recovered from their decade-low prices.

Lower copper prices negative for Freeport-McMoRan

Freeport’s earnings are sensitive to copper prices. The company estimates its EBITDA (earnings before interest, taxes, depreciation, and amortization) fall by $500 million for every $0.10 per pound fall in copper prices.

Earnings of other copper producers, including Turquoise Hill Resources (TRQ) and Southern Copper (SCCO), are also negatively impacted by falling copper prices.

Goldman now expects copper prices to reach $4,500 per ton, or approximately $2.04 per pound, by the end of 2016. This represents a ~12% downside from current copper prices.

Freeport, which is the second-largest copper producer after the Chilean government–owned Codelco, is a part of several leading ETFs. It currently forms 2.16% of the Materials Select Sector SPDR Fund (XLB) and 3.18% of the SPDR S&P Metals and Mining ETF (XME).

In the next part, we’ll explore how copper prices could play out in the second half of 2015.

What Do Recent Copper Industry Indicators Mean? (Part 3 of 9)

Would Supply Disruptions Lend Support to Copper Prices in 2H15?

By Mark O'Hara • Aug 13, 2015 2:43 pm EDT

Supply disruptions

Previously, we noted that copper prices are testing their six-year lows. Copper miners such as Freeport-McMoRan (FCX) and BHP Billiton (BHP) are now rethinking their business plans to tackle the low commodity price scenario. Recently, BHP has announced job cuts in its Olympic Dam copper mine in Australia (EWA). Freeport might also look at curtailing some of its high-cost mines. Other copper miners could follow suit.

In the aluminum industry, producers including Alcoa (AA) have been shutting down high-cost smelters in a bid to improve their competitive positioning as well as restore the supply balance in the markets.

In this part, we’ll look at some of the other factors that could reduce the copper supply in the near term.

Torrential rains in Chile

Chile, the world’s largest copper miner, has been rattled by heavy rainfall for the second time in 2015. Operations at some of the key Chilean (ECH) copper mines were halted due to the heavy downpours. Supply side disruptions could offer some support to copper prices in the second half of 2015.

Earlier this year, there were supply-side disruptions, including incessant rains and floods in Chile. Chile’s copper production fell between February and April this year due to these weather disruptions, as seen in the chart above.

Supply side disruptions were a possible reason behind higher copper prices toward the beginning of 2015.

Power shortage in Zambia

There has been a disruption in copper supply coming from Zambia as well. The country is going through a severe power crisis that has negatively impacted copper production.

Lower copper supply could push more metal out of LME (London Metal Exchange) warehouses.

In the next part of this series, we’ll analyze how LME copper inventories are shaping up.

What Do Recent Copper Industry Indicators Mean? (Part 4 of 9)

LME Copper Inventory Surges to a Two-Year High on Subdued Demand

By Mark O'Hara • Aug 13, 2015 2:43 pm EDT

London Metal Exchange copper inventory

Previously in this series, we learned that copper prices recently plunged to six-year lows. Now, we’ll look at how copper inventories are shaping up on the LME (London Metal Exchange).

On-warrant inventory

The previous chart shows the on-warrant copper inventory with the LME. All metal that enters the warehouses is considered to be on warrant. The warrants are canceled when the bearer of these warrants requests physical delivery. These warrants are then no longer available for trading. The inventory level in warehouses isn’t affected by canceled warrants. Inventory levels are affected only by the physical movement of the metal.

You could also say that only the on-warrant metal is available for delivery. Instead of considering total copper stocks, it’s better to look at the on-warrant copper inventory.

As you can see in the chart above, on-warrant copper stocks have increased over the last couple of months. On August 7, LME on-warrant copper stocks stood at 329,425 metric tons—the highest level since June 2013.

Copper demand could be weak

Higher on-warrant copper stocks imply that less metal is being booked for delivery—a sign of weakening demand. The ICSG (International Copper Study Group) estimates that global (ACWI) copper demand declined by 4% YoY (year-over-year) as of April. This was largely led by the slowdown in Chinese (FXI) demand, which declined 5% YoY over this period.

Less Chinese demand for copper negatively impacts copper producers such as Freeport-McMoRan (FCX), Southern Copper (SCCO), and Turquoise Hill Resources (TRQ).

In the next part of this series, we’ll take stock of Chinese copper inventories

What Do Recent Copper Industry Indicators Mean? (Part 5 of 9)

Chinese Copper Inventory is Steady despite Demand Slowdown

By Mark O'Hara • Aug 13, 2015 2:43 pm EDT

Chinese copper inventory

Previously, we discovered that LME (London Metal Exchange) on-warrant copper stocks have increased in the last few days. In this part of the series, we’ll discuss the recent trend in Chinese copper inventory, which recently plummeted to a one-year low.

As China (MCHI) (EWH) is the largest copper consumer, it’s pertinent for investors in companies such as BHP Billiton (BHP), Rio Tinto (RIO), and Teck Resources (TCK) to keep a close eye on the Chinese copper inventory.

Inventory holding steady

The above chart shows the trend in on-warrant copper inventory with the Shanghai Futures Exchange (or SHFE). As you can see, on-warrant copper stocks have been quite steady over the last month.

The on-warrant copper inventory with the SHFE was 11,032 metric tons on August 7, which is almost unchanged from inventory levels at the beginning of July. Nevertheless, copper stocks have come down significantly on a year-to-date basis.

However, bonded copper stocks, which are held in free-trade zones in China, have surged over the last few months. The data is not released officially, but Bloomberg estimates the figure at a whopping 650,000 metric tons as of the end of July. This represents a month-over-month decline of ~4%.

What does a lower copper inventory imply?

Falling copper inventory is generally regarded as a positive signal. Copper moving out of warehouses means that copper supply in the market is lower when compared to the demand. Conversely, copper inventory goes up in the warehouses when supply exceeds demand.

However, the ground situation in China doesn’t seem to suggest any uptick in copper demand. We’ll explore this further when we look at copper demand indicators in the coming parts of the series. In the next part, we’ll look at the supply side dynamics of the Chinese copper industry.

What Do Recent Copper Industry Indicators Mean? (Part 6 of 9)

China’s Refined Copper Production Rises 11.2% in June

By Mark O'Hara • Aug 13, 2015 2:43 pm EDT

China’s refined copper production

Previously, we noted that Chinese copper inventory recently fell to a one-year low. Now, we’ll explore how refined copper production is progressing in China.

China (FXI) is the largest producer of refined copper in the world, accounting for over a third of global refined copper production. Chile (ECH) is the second-largest producer at the refinery level, and Japan is the third-largest producer.

Production increased 11.2% in June

The above chart shows the trend in China’s refined copper production, according to data released by the National Bureau of Statistics of China. In June, China produced 0.69 million tons of refined copper, an 11.24% YoY (year-over-year) increase. In May, production increased by ~6% YoY.

Meanwhile, China’s imports of refined copper have been on a steady decline. In the first six months of 2015, China’s refined copper imports have come down more than 10% YoY.

China’s copper smelting capacity has increased

Over the last several years, China has enhanced its copper smelting capacity in a bid to increase employment. As its domestic copper demand sputters and more smelting capacity comes online, China’s refined copper imports have declined. Mining companies such as Freeport-McMoRan (FCX), Southern Copper (SCCO), and Turquoise Hill Resources (TRQ) are impacted by China’s slowdown.

China is the largest refined copper producer, but it lacks copper mineral deposits. It must import unprocessed copper ore and copper scrap. Analysts track the imports of these materials as an indicator of future refined copper production in China.

In the next part of this series, we’ll discuss the latest trend in Chinese copper imports.

What Do Recent Copper Industry Indicators Mean? (Part 7 of 9)

Chinese Copper Imports Dip in July Month-over-Month

By Mark O'Hara • Aug 13, 2015 2:43 pm EDT

Chinese copper imports

Previously in this series, we discussed the trends in Chinese refined copper production. While China (MCHI) is the largest consumer of copper, it’s not self-sufficient in its production of the metal. China needs to import raw copper for its smelters and refining plants.

Copper mining is concentrated in Latin America (ILF). From there, it’s shipped to Asia, where more than half of copper is consumed. In this part of the series, we’ll look at Chinese copper imports in July.

Copper trade

China is the largest importer of copper ore, anodes, and refined copper. Chile, on the other hand, is the biggest exporter of these products. Japan is the second-largest importer of copper ore and concentrates, and India is the third-largest importer. These countries process copper ore into refined copper.

The chart above shows the trend in China’s imports of copper ore and concentrates. In July, Chinese imports dipped by 1.8% over June. Nevertheless, compared with July 2014, imports increased by 7.6%.

China’s copper ore and concentrates imports have increased more than 10% year-over-year until July. However, as discussed in the previous part, China’s refined copper imports have been on a steady decline.

Copper production could increase

Higher copper ore and concentrate imports by China imply higher future copper production. However, if you are an investor in copper producers such as Freeport-McMoRan (FCX), Southern Copper (SCCO), and BHP Billiton (BHP), you might also want to explore how China’s copper demand is playing out.

In the next part of our series, we’ll look at some indicators of Chinese copper demand.

What Do Recent Copper Industry Indicators Mean? (Part 8 of 9)

Copper Demand Subdued as China’s Manufacturing Engine Sputters

By Mark O'Hara • Aug 13, 2015 2:43 pm EDT

Copper demand

Previously, we have seen that China’s (FXI) refined copper production is on an uptrend while it has reduced its reliance on refined copper imports. China is now importing more copper ore so it can to refine the ore domestically. Interestingly, looking at the first six months of 2015, China’s refined copper imports have dipped ~10% year-over-year (or YoY) while the imports of copper ores and concentrates have risen by a similar amount over this period.

China’s manufacturing sector has been the growth engine for global copper demand over the last decade, fueling the so-called commodity super cycle. In this part, we’ll look at some indicators of China’s manufacturing activity.

Exports down

China’s exports fell 8.3% YoY in July, which was worse than the average analyst estimates. China’s exports have fallen because of lower demand from its major trading partners, including Europe (VGK) and Japan.

China’s imports also fell 8.1% YoY in July. Lower imports reflect a slowdown in China’s economy. However, China’s 2Q15 GDP shows an expansion of 7%, and several analysts have questioned the way GDP figures were calculated.

PMI below 50

China’s manufacturing PMI (purchasing managers’ index) fell to a two-year low, touching 50. This can be seen in the above chart. The data, which was released by Markit on August 3, acted as a blow for market sentiments. Worse, the final PMI figure was lower than the preliminary reading.

China’s real estate indicators should be out in the next couple of days. The slowdown in China’s property sector has been a major risk for miners, including Rio Tinto (RIO), Vale S.A. (VALE), and Teck Resources (TCK).

In the next part, we’ll look at the indicators of US copper demand.

What Do Recent Copper Industry Indicators Mean? (Part 9 of 9)

Strong US Copper Demand Indicators Bode Well for Freeport-McMoRan

By Mark O'Hara • Aug 13, 2015 2:44 pm EDT

US copper demand indicators

Previously in this series, we noted that China’s copper demand indicators are on a downtrend. Meanwhile, Freeport-McMoRan (FCX) gets almost half of its revenues from North America. In this final part of the series, we’ll explore how the US copper demand is shaping up.

Auto sales strong

US auto sales are still going strong, hitting a seasonally adjusted annual rate (or SAAR) of 17.46 million units in July, as seen in the chart above. Copper radiators, motors, brakes, and bearings are used in the automotive industry. According to estimates, copper content averages about 50 pounds in an average mid-sized vehicle. Strong auto sales bode well for copper demand in the United States (SPY) (IVV).

Construction spending up

Construction spending has been strong in the US, breaching the $1 trillion annualized mark for three consecutive months. Other leading indicators of construction activity include building permits and housing starts, which have also reached their pre-crisis highs.

Copper is widely used to produce plumbing parts and components, including taps, valves, and other plumbing bathroom fittings. Copper is also used in water pipes and fire sprinkler systems in buildings.

This uptick in construction activity would lead to higher copper demand. However, even strong demand in North America wouldn’t help copper producers like Southern Copper (SCCO) and Teck Resources (TCK) if copper prices remain at depressed levels.

Investors should keep a close eye on how copper prices play out in the second half of 2015.

Please visit Market Realist’s Copper page to learn more about this industry’s drivers.