Chile: Copper prices edge down in February; Chilean copper production rises in January
Copper prices dipped in February to USD 8,937 from the prior month’s USD 9,007, and tracked slightly below USD 9,000 in early March. This was likely the result of some tempering of market optimism after China’s economic reopening had led prices to surge in January. Moreover, the supply situation appears to have improved recently; Peruvian mines are reportedly cranking up output following disruptions due to social unrest, while Chile’s copper production rose 1.3% year on year in January. That said, Chilean copper output likely continues to be held back by a deterioration in ore quality and lower refining rates.
Copper prices are seen dipping over the course of this year as economic activity in advanced economies ebbs, but should remain above USD 8,000 per ton. Together with a soft domestic economy and high social spending demands, this will lead to the fiscal balance slipping into deficit in 2023.
Regarding copper output, uncertainty is being generated by an updated mining royalty bill currently in Congress and the lack of clarity over mining regulation in the future constitution. Moreover, President Boric’s government is prioritizing the environment over boosting copper output, as evidenced by the decision in January to reject the USD 2.5 billion Dominga mine project. That said, Chile will remain the world’s largest copper producer for the foreseeable future.