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Chile Commodities April 2023

Chile: Copper prices edge down in April; Chilean copper exports perform well

Copper prices dipped in April to USD 8,809 from the prior month’s USD 8,856, and tracked close to USD 8,500 in early May. Solid Chilean copper exports in the last few months, coupled with recovering supply from Peru thanks to easing protests, have weighed on prices. This is despite seemingly solid demand: PMI data pointed to improving operating conditions among copper users in March and April.

Copper prices are seen close to their current level later this year, with fading economic activity in advanced economies broadly offset by stronger Chinese demand. Together with sluggish economic momentum at home and high social spending demands, this will lead to Chile’s fiscal balance slipping back into deficit in 2023 following the 1.1% of GDP surplus in 2022.

On the supply side, Chilean copper output will be constrained this year by declining ore grades and water shortages, which will be partly offset by several new projects due to come online. An updated mining royalty bill currently in Congress, which could potentially weigh on investment if approved, is a risk. Moreover, President Boric’s government rejected the USD 2.5 billion Dominga mine project in January, in a sign of its pro-environment focus. That said, in April the government did greenlight a USD 3 billion investment in the Los Bronces mine. In addition, the large right-wing majority in the recently elected constitutional council precludes any strict anti-mining legislation in the new constitution.

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