Freeport-McMoRan (FCX 0.65%) recently reported its fourth quarter earnings, which fell short of expectations. Investors' negative reaction to the earnings miss could be a one-time event. However, I believe there are several factors that could stall shares of Freeport-McMoRan at current levels.

Problems in Indonesia
The Indonesian government is focused on processing minerals within the country. As a result of this focus, the country has decided to impose a tax on copper concentrate exports. The tax starts at 25% in 2014 and grows to 60% in 2016. After 2016 the tax gives way to a complete ban on copper concentrate exports.

Freeport-McMoRan is operating a huge Grasberg mine in Indonesia. According to the company's latest reserve evaluations, 27% of its copper reserves are in Indonesia. Currently, Freeport-McMoRan processes 40% of output from Grasberg operations at the Indonesian smelter.

During the Q&A session of its earnings call, the company outlined the reasons why it will be hard to build another smelter to process the remaining 60% of copper concentrate. Freeport-McMoRan built the existing smelter in the mid 90's. Since then, the cost of building a similar smelter has tripled. At the same time, processing fees remained the same due to the fact that a lot of smelting capacity emerged in China. This makes the building of a new smelter economically difficult.

What does it mean for investors? In my view, it means that Freeport will be in a long round of negotiations with the Indonesian government. There is no reason to export copper concentrate while the tax is functioning. What's more, Freeport has an existing contract of work with the government which gives the company the right to export concentrates. I believe it will not be a short battle, and it could possibly hurt Freeport's results.

Warning signs from China
According to the latest issue of HSBC Flash China Manufacturing Purchasing Managers' Index, the Chinese manufacturing sector hit a six-month low in January. Several days earlier, the data on Chinese GDP showed that the growth was the lowest in 14 years.

Other copper producers like Rio Tinto (RIO 0.60%) and BHP Billiton (BHP 1.50%) could be worried as well. Both companies have recently been increasing their copper production. Rio Tinto's latest production update showed a 6% production gain in comparison with the previous quarter. BHP managed to produce 9% more copper in comparison with the third quarter.

So far, copper hasn't taking the worst beating of the metals because of its wide industrial utilization. However, if the data from China continues to disappoint, copper prices will be under significant pressure.

Dividend increase is unlikely
Freeport-McMoRan took significant debt to pursue the acquisition of oil and gas assets in 2013. The long-term debt stood at $20.4 billion at the end of the fourth quarter. The company is looking to reduce the debt to a level of approximately $12 billion in 2016.

At the same time, Freeport-McMoRan plans to spend $7 billion on capital expenditures in 2014, up from $5.3 billion in 2013. It is highly unlikely that the company will be able to find additional funding for the dividend while it works toward reducing its debt and funding its growth.

Bottom line
Freeport-McMoRan's shares have had a nice run since July, but now the company needs to show better performance to continue this trend. I don't think that the potential problems in Indonesia have been priced in. Therefore, if the situation unfolds in a negative scenario, the shares will find themselves under pressure.

It is still too early to call latest data points from China a new trend. However, one must not underestimate the impact that a potential slowdown in China could impose on the commodity markets. All in all, I believe that the upside for Freeport-McMoRan is limited.