Chile: Copper prices dip in October
November 1, 2022
Copper prices declined in October to USD 7,651 per metric ton from the prior month’s USD 7,746 per ton. Prices were down 22.2% in October from the same month of the prior year.
Lower prices last month were again driven by soft global demand dynamics, amid rising interest rates and a Chinese economy buffeted by Covid-19 restrictions and a property downturn. Meanwhile, Chile’s copper output fell 2.6% year on year in September, the 14th straight monthly decline but the softest so far this year. Chile’s output has been dampened in recent months by a deterioration in ore quality, water shortages and lower refining rates.
Looking forward, the rejection of the proposed constitution and the government’s investment plan announced in September are positive for the mining sector. However, uncertainty is still being generated by an updated mining royalty bill currently in Congress, which is set to increase companies’ tax burden and could deter investment. In any case, Chile will remain the world’s largest copper producer for the foreseeable future. Copper prices are now expected to average between USD 7,000 and USD 8,000 next year. This is down from the USD 9,000+ level observed during much of 2021 and H1 20222, which will contribute to a widening of the fiscal deficit next year.
Author: Oliver Reynolds, Economist