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Chile Commodities April 2020

Chile: Average copper prices dip further in April

In April, average copper prices fell for a fifth consecutive month amid the economic fallout of Covid-19 and lingering uncertainties over the length of a recovery in industrial activity. On average, prices for the red metal logged USD 5,052 per ton (equivalent to USD 2.29 per pound), down from March’s average price of USD 5,183 per ton (equivalent to USD 2.35 per pound). Meanwhile, prices were 21.6% lower than in the same month of 2019.

On the heels of March’s crash in prices owing to the spread of Covid-19, copper prices remained largely depressed amid uneven prospects for demand ahead. On the one hand, a second consecutive monthly expansion in Chinese manufacturing activity and a cheaper dollar supported a mild upturn in prices. On the other hand, investors’ appetite was tempered by lingering uncertainties over the length of the pandemic and growing concerns of an escalation in the U.S.–China trade conflict ahead, following Donald Trump’s threat on 30 April of additional Chinese tariffs.

Meanwhile, supply side constraints continued to bubble away in the background. On 8 April, Glencore temporarily closed its Mopani copper mine in Zambia, thus joining several other miners that have scaled down operations and suspended projects since prices crashed in March. In Chile, Codelco issued USD 800 million in bonds in April to strengthen its liquidity after S&P Global Ratings downgraded the company’s credit rating to A from A+ while keeping a stable outlook, amid growing cashflow challenges ahead.

Copper prices are expected to gain ground over the coming month as countries emerge from the health crisis. Demand from China is slated to continue recovering, which, coupled with lower supply prospects, should boost prices ahead. Nevertheless, uncertainties regarding the economic impact of Covid-19 cloud the outlook. Looking further ahead, the medium-term price outlook for copper looks bright as refined production lags slightly behind usage, amid limited production capacity and increasing demand for copper in new technologies such as electric vehicles and green-energy projects.

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