Freeport-McMoRan Inc (NYSE:FCX) Adversely Affected By Slowdown In China’s Housing Sector

While China is continuously becoming the global giant of copper, there is a slowdown in the real estate sector of the country. This slowdown, in turn, is adversely affecting the producers like Freeport-McMoRan Inc (NYSE:FCX) and others in the industry.

Why is momentum shifting in FCX?  Read this analyst breakdown.

The Top Spot of China in Copper

In 1990, the U.S. remained at the top most position for consuming copper. The copper consumption in 1990 accounted for 20% of the world. Japan stood at the second position in 1990. China, at this time, consumed just 5% of the world copper.

Now, in 2015, China has become the highest consumer of copper and these accounts for over 42% of the global consumption. Also, Japan has come down to the fourth position now. These changing trends of copper consumptions of some of the biggest economies are indicating the dynamics of new world.

Chinese Housing sector and impact on Freeport

The real estate sector is among the major consumers of copper in China. Demand from its power sector also largely depends on realty. At the same time, for power transmission lines to be laid down, the demand of copper will increase. But the slowdown in this sector has left a negative effect on companies like Freeport, Teck Resources Ltd (USA) (NYSE:TCK), Glencore International PLC, St. Helier (OTCMKTS:GLNCY) and Southern Copper Corp (NYSE:SCCO).

At present, Freeport forms the 3.1% portion of Materials Select Sector SPDR (NYSEARCA:XLB).

China- the premier Manufacturing Location

At present, China has become the manufacturing hub of the entire world. As far as the premier manufacturing locations are concerned, China has beaten even the U.S. and Japan. It not only produces, but also exports a range of copper-containing appliances. The major sector that consumes copper in China is manufacturing. It is also expected that the manufacturing PMI of Dragon will gauge the copper demand there.

Support from the Government driving copper consumption high

It is the support of their Government that is pushing the copper consumption towards upward direction. The Chinese Government is massively investing in the infrastructural development, which is increasing the use of copper. Transmission lines and power generation are two factors where they have invested heavily, and the power sector is the one which makes the most use of copper in China.

David Barry

David Barry

Barry is a senior journalist at Us Markets Daily. He reports, shoots and edits many of his own stories by himself.