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Chile Commodities August 2023

Chile: Copper prices fall in August; copper output rises in July

Copper prices averaged USD 8,348 in August, down from the prior month’s USD 8,477. Prices were likely dampened in recent weeks by disappointing economic data from China and the lack of major Chinese stimulus measures. The latest data shows that Chilean copper output rose 0.9% in annual terms in July, marking the first rise since January.

Copper prices are seen averaging close to their current levels through the end of this year. Copper demand from developed markets will likely flag due to high interest rates, and economic momentum in China should stay sluggish due to weak sentiment and a housing market downturn. That said, major Chinese stimulus measures are an upside risk to prices.

On the supply side, Chilean copper output will likely fall in 2023 as a whole relative to 2022 amid declining ore grades and water shortages in H1. That said, heavy rains since June could ease water shortages in H2 and thus support output. The combination of lower average copper prices this year compared to last, soft domestic copper output, muted economic activity and high social spending demands will lead to a renewed fiscal deficit and a consequent rise in the public-debt-to-GDP ratio this year.

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