Citigroup has upgraded its rating on Freeport-McMoRan (FCX.US) from "Neutral" to "Buy" in a recent research report. The bank's analysts indicate that supply chain disruption issues and favorable macroeconomic factors are expected to drive copper prices to historic highs within the next 18 months. Citigroup currently forecasts copper prices will reach $12,000 per ton by the first half of 2026.
The bank's rationale includes "unprecedented mine shutdowns, sustained strong market demand, and supportive macro trends" - such as U.S. interest rate cuts and dollar weakening. Additionally, Citigroup notes that recent market sell-offs triggered by the Indonesia Grasberg mine accident have resulted in Freeport-McMoRan's valuation trading below peers, creating what they describe as a "rare opportunity" for investors.
Citigroup acknowledges that the timeline for Grasberg copper mine's capacity recovery may exceed official guidance. The bank's model assumes production will decrease by nearly 50% in 2026, but emphasizes that the ore body structure remains undamaged. Citigroup states that market risk concerns are overly reflected in the stock's discount: "Even with a two-year shutdown, our calculated net asset value (NAV) would only decline by approximately 15%," wrote the analyst team led by Alexander Hacking.
The report also mentions that Freeport-McMoRan's U.S. operations have growth potential - improved production efficiency combined with potential tariff policies on refined copper imports are both expected to boost company profitability.
Meanwhile, Citigroup maintains a "Sell" rating on Southern Copper (SCCO.US) due to excessive valuation; maintains "Buy" ratings on First Quantum and Ivanhoe Mines; and maintains a "Neutral" rating on Teck Resources (TECK.US).
Citigroup's base forecast suggests that copper supply shortages will ease somewhat after 2026 as Grasberg, Kamoa-Kakula, and other major projects increase production. Nevertheless, the bank remains optimistic about Freeport-McMoRan's performance, reasoning that as investor confidence in the company's recovery plan strengthens and its position as the world's largest publicly traded copper mining company is further consolidated, the company's stock price is expected to outperform the market.