Copper Prices Slide, Freeport Follows

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) shares dropped sharply as copper dropped to its lowest level in more than seven months. The London Metal Exchange fell as low as $6,980 a tonne as inventories posted their largest one-day surge in four years. Notably, the price is also below the key technical level of $7,000 a tonne, which means a further drop could be in the cards. The news sent miners like Freeport sharply lower on the day.

The rise in inventories was a surprise for some people and caused a panic in the marketplace. Copper stocks rose 18,775 tonnes to 200,875 tonnes. There has also been talk of a large amount of copper going to warehouses and there could be more to come, according to one trader. Meanwhile, macroeconomic concerns also continue to weigh on prices in the near term. These concerns include the strengthening dollar value, which has weighted on all dollar-priced commodities.

Copper's drop below $7,000 also trigger technical selling that added to the downside pressure. Technical traders often rely on even-number psychological support levels - like 7,000 - to hold up prices. Often times, traders also place stop-loss or limit orders at these levels, which means automatic trading is often triggered around these points. Today is no different as the market saw a sharp increase in selling after the break was made.

Freeport-McMoran Copper & Gold Inc., through its wholly owned subsidiary, Phelps Dodge, and its majority-owned subsidiary, PT Freeport Indonesia, is a copper, gold and molybdenum mining company. In North America, the Company has six operating copper mines: Morenci, Bagdad, Sierrita and Safford in Arizona, and Chino and Tyrone in New Mexico, as well as one operating molybdenum mine: Henderson in Colorado. In South America, the Company has four operating copper mines: Cerro Verde in Peru, and Candelaria, Ojos del Salado and El Abra in Chile.

Shares of Freeport are down $4.83, or 6.45%, to $70.10 per share in early trading.