An in-depth analysis predicts that the copper market will soften in the back half of 2025 due to unsustainable current prices and weak demand, suggesting that Freeport-McMoRan may currently be overvalued. J.P. Morgan Global Research outlines a "payback" period for copper, driven by unwinding U.S. imports and a deceleration in Chinese demand, while concerns persist regarding Freeport-McMoRan's stagnant growth and rising costs.

U.S. equities saw a cautious tone in sectors tied to industrial commodities this week, as new analyses pointed to a significant softening in the global copper market expected in the latter half of 2025. This outlook casts a bearish shadow over copper prices and related equities, particularly Freeport-McMoRan (FCX), which is assessed to be potentially overvalued given these projected market conditions.

The Event in Detail

J.P. Morgan Global Research maintains a cautious outlook for copper prices, anticipating a "payback" period in the second half of 2025. According to Gregory Shearer, Head of Base and Precious Metals Strategy at J.P. Morgan:

"We think the second half of 2025 will bring payback, unwinding the front-loading dynamics and reducing demand, leaving us more cautious on copper prices over the balance of the year."

This cautious stance is primarily attributed to two key factors: the unwinding of front-loaded U.S. refined copper imports and an expected slowdown in Chinese demand. U.S. refined copper imports surged by 129% year-over-year through May, leading to an unprecedented inventory build-up. This was largely driven by anticipation of potential tariffs. J.P. Morgan expects this front-loading to unwind, leading to a multi-month destocking cycle in the U.S. This shift is predicted to divert copper away from the U.S. and back to global markets, helping to replenish London Metal Exchange (LME) inventories and creating a "stiffer headwind for LME copper prices."

Concurrently, Chinese copper demand, which showed approximately 10% year-over-year growth through May, is expected to decelerate in the second half of 2025. This slowdown is linked to a decline in housing completions, reduced requirements for air conditioning and white goods, and a significant reduction in solar installations due to regulatory changes. China's economic trajectory is described as entering a new phase of slower, more sustained growth, moving away from the high single-digit rates seen less than a decade ago.

Against this backdrop, J.P. Morgan projects LME copper prices to slide toward $9,100/metric tonne (mt) in the third quarter of 2025 before stabilizing around $9,350/mt in the fourth quarter.

For Freeport-McMoRan (FCX), a strong sell rating was reiterated on September 10, 2025. The company appears overvalued at 27.17x forward GAAP earnings, especially when compared to its five-year average valuation of 29.65x expected forward GAAP earnings. Despite appearing solid on the surface, Freeport-McMoRan's recent second-quarter earnings report, with GAAP Actual earnings per share of $0.53 (beating consensus by $0.09) and revenue of $7.58 billion (beating expectations of nearly $7.62 billion), revealed underlying warning signs. Net income, production, and revenue growth have stalled since March 2022, while costs and capital expenditures are on the rise. Unit production costs for copper came in ahead of consensus estimates at $1.13 per pound, with full-year guidance rising to $1.55 per pound. The company also continues to face significant production issues at key mines, including those in Indonesia, alongside aggressive spending, notably a projected $5 billion in capital expenditures this year.

Analysis of Market Reaction

The anticipated softening of the copper market stems from a combination of demand-side weakness and the unwinding of speculative positioning. Current copper prices are deemed unsustainable given the projected decline in demand. The critical factor is China's economic rebalancing away from infrastructure and construction-led growth, which directly impacts a commodity where Chinese demand accounts for nearly 60% of global consumption, with its property sector alone comprising 30% of domestic use. The unwinding of U.S. imports, initially driven by tariff anticipation, will further contribute to supply normalization, dampening price support. For FCX, the market's projected shift implies increased scrutiny on its valuation, particularly as its earnings and revenue growth have shown stagnation, and production costs are climbing.

Broader Context & Implications

This outlook extends beyond individual companies to the broader mining and commodities sectors. A sustained period of lower copper prices could signal a broader slowdown in industrial activity globally, affecting companies reliant on the metal and potentially leading to a re-evaluation of long-term commodity investment strategies. While J.P. Morgan anticipates prices to remain largely supported at or just above $9,000/mt absent a significant macroeconomic downturn, the current forecast represents a clear shift from recent market dynamics. Other companies in the sector, such as Anglo American, are also restructuring to focus more on copper, making them more exposed to these softening demand signals from China.

Looking Ahead

Investors will be closely monitoring several key factors in the coming months. The trajectory of China's economic growth and its property sector will be paramount in determining global copper demand. Additionally, any shifts in global trade policies, particularly regarding tariffs, and the broader macroeconomic environment, including central bank interest rate decisions, will significantly influence commodity prices. For Freeport-McMoRan, the focus will be on management's ability to navigate rising costs, production challenges, and a potentially weaker pricing environment, which will ultimately dictate its stock performance in the face of a cautious copper market outlook.