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Freeport-McMoRan ( FCX) shares jumped 44% last month as optimistic investors pounced on signs of a potential economic recovery. But they will probably have to wait at least a year to see sustained gains.

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Weak earnings, stock volatility and shaky demand continue to challenge the world's largest publicly traded copper producer. Last month, Macquarie Bank cut its 2010 price forecast for copper by 10% to $1.80 a pound. That's a 9% decline from yesterday's closing price of $1.97 on the New York Mercantile Exchange.

Still, UBS Investment Research raised its earnings forecast for Freeport for this year and 2010, and boosted its price target to $49 on Thursday. The Phoenix-based company's shares rallied 9% that day, but that excitement might be short-lived as economic deterioration poses obstacles to metal and mining companies this year.

Demand for copper in China, the No. 1 consumer of copper in the world, has grown faster than any other major region of the world in recent years, according to the International Wrought Copper Council. In February, the country imported a record 329,000 tons of copper.

To be sure, the second-largest user of copper is the U.S., whose auto and homebuilding industries continue to struggle. Sales at General Motors ( GM), Ford ( F) and Chrysler dropped more than 39% in March. The average American car uses 55 pounds of copper, according to the Copper Development Association, and industry trade group.

Homebuilders put 439 pounds of copper into the average single-family home. February housing starts rose 22% from January, but were down 47% from the year-earlier period.

Copper stockpiles have surged to around 567,000 tons since the summer, indicating excess supply and fallen demand. Until U.S. gross domestic product starts to grow again, expect weak demand for copper in developed economies.

Freeport cut the 2009 copper sales forecast it set in October by 9% to 3.9 billion pounds. The company reduced its 2010 projection even more, by 17% to 3.8 billion pounds.

We've rated the company's shares "sell." Freeport lost $13.9 billion, or $36.78 a share, in the fourth quarter after writing down the value of mines and metal stockpiles it gained in the Phelps Dodge acquisition. Revenue fell 51% from a year earlier and cash flow decreased 86% year-over-year. The company's quick ratio, a measure of liquidity, shrank to 0.66.

Freeport shares have climbed 75% this year, though fell 77% in 2008. They're trading at cheaper prices compared to those of peers such as Southern Copper ( PCU), Sterlite Industries ( SLT), Teck Cominco ( TCK) and Compass Minerals ( CMP). But keep in mind we're in the worst recession since the Great Depression, and demand for commodities is nowhere near the level of the past few years.

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