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Chile Commodities March 2023

Chile: Copper prices edge down in March; Chilean copper production falls in February

Copper prices dipped in March to USD 8,856 from the prior month’s USD 8,937, and tracked slightly below USD 9,000 in the first half of April. On the demand side, March PMI data suggested softer demand growth among copper users amid a slowdown in Asia. On the supply side, Chile’s copper production returned to contraction in year-on-year terms in February. Chilean copper output likely continues to be held back by a deterioration in ore quality and lower refining rates. In contrast, Peru’s copper output should have benefited in recent weeks from easing protests.

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 Chile’s fiscal balance slipping back into deficit in 2023 following the 1.1% of GDP surplus in 2022.

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.

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