Chile: Copper prices fall to near four-year low in March
In March, average copper prices fell to their lowest point since July 2016 as Covid-19 continued to rattle commodity markets. On average, prices for the red metal logged USD 5,183 per ton (equivalent to USD 2.35 per pound), down from February’s average price of USD 5,688 per ton (equivalent to USD 2.58 per ton). Meanwhile, prices were 19.5% lower than in the same month of 2019.
Copper prices plummeted amid a slump in demand for raw materials as governments around the world imposed severe restrictions to contain Covid-19, extinguishing economic activity in turn. Moreover, March’s historic run on the dollar added further downward pressure on copper, in turn prompting large mining companies to reduce output and postpone new projects. Meanwhile, although Codelco, the world’s largest producer of copper, discarded lowering output, on March 25 it put three projects worth up to USD 8.0 billion on hold to curtail the spread of the virus. The decline in copper prices is complicating the outlook for the Chilean miner, on the heels of a 17% decline in profits last year due to trade war volatility.
This year, copper prices are expected to pick up on expectations that the Covid-19 will be contained. Copper demand from China is slated to recover in the coming months as indicated by a sharp rebound in the manufacturing PMI in March. Nevertheless, prices are unlikely to gain significant ground before global economic activity gets back on track. Looking further ahead, the medium-term price outlook for copper looks bright as refined production lags slightly behind usage, amid limited production capacity and increasing demand for copper in new technologies such as electric vehicles and green-energy projects.