The commodities bust may be about to claim some brand-name victims:

Freeport-McMoRan Inc: The Hits Just Keep Coming

Freeport-McMoRan (NYSE:FCX) is off to a brutal start in 2016 with its stock price down nearly 40% in just over a week. The company is being battered by a barrage of negative news items, with the latest being another analyst downgrade. The rough start, which follows a very tough 2015, has a lot of investors wondering if the company will make it through the year in one piece.

The weakness in the copper price has been the biggest weight on Freeport-McMoRan’s stock this year. Its price recently hit a six-year low due to growing concerns of a worsening slowdown in China, which is the world’s biggest copper market. With copper falling below $2 per pound it calls into question Freeport-McMoRan’s ability to generate sufficient cash flow to both manage its debt and fund its capex plan. It’s a plan that is based on a $2 copper price in 2016 and $45 per barrel for oil. Presently, copper is a few pennies below that level, while oil has plunged into the low $30s.

Those price weaknesses not only will weigh on the company’s cash flow, but are weighing on the value of oil and copper assets. That’s making it even less attractive for Freeport-McMoRan to pursue asset sales to pay down its large debt load. In fact, asset values have fallen so steeply that one Jefferies analyst is concerned that “window of opportunity for Freeport-McMoRan to repair its balance sheet may have closed.” That’s after the company has yet to find a funding solution for its oil and gas business after searching for alternatives for more than a year.

Glencore Debt Swaps Jump to Six-Year High as Copper Price Slides

(Bloomberg) – The cost of insuring Glencore Plc’s (GLNCY) debt against default rose to a more than six-year high as the price of raw materials such as copper continued to tumble.

The trader and miner’s credit default swaps increased to as much as 946 basis points, the highest since April 2009 on a closing basis, according to data from S&P Capital IQ’s CMA.

Slumping commodity prices have battered Glencore, prompting it to scrap a dividend payment, sell new shares and outline asset sales as it seeks to curb debt to maintain its investment-grade rating. Copper dropped to a six-year low amid a rout in metals as muted Chinese inflation increased concern that demand from the world’s largest buyer of raw materials will slow.

“CDS levels are driven by commodity prices and in the case of Glencore, especially copper,” said Max Mihm, a Frankfurt-based portfolio manager at Union Investment, which holds Glencore bonds among assets totaling about $271 billion. “If prices fall further and stay low Glencore will need to do more to protect its IG ratings.”

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