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Chile Commodities June 2019

Chile: Copper prices fall to two-year-low in June

Copper prices sank to their lowest point in two years in June, dragged by the escalation of the U.S.–China trade war at the beginning of May and concerns over a slowdown in global growth. Average prices for the red metal clocked in at USD 2.67 per pound in June (equivalent to USD 5,882 per ton), falling from May’s average price of USD 2.73. In addition, copper prices were 15.6% lower than in the same month last year, while on a year-to-date basis they were down by 1.0%.

In June, prices lost all of this year’s gains amid trade war uncertainties, and weak manufacturing and investment data from China, the world’s largest consumer of the metal. That said, prices slightly recovered in the second half of June following the weakening of the U.S. dollar after increased dovishness by the Fed. Moreover, sentiment towards copper turned positive after Donald Trump and Xi Jinping resumed trade negotiations at the Osaka G-20 meeting on 30 June. The effect on prices should be limited, however, until further progress is made given that the U.S. and China remain at odds over significant parts of the agreement.

On the other hand, despite demand side jitters, supply side fundamentals remain bullish. According to the International Copper Study Group (ICSG), global copper output contracted in the first quarter on an annual basis. Moreover, production remained stunt in the second quarter, as constraints at Peru’s Las Bambas mine, a 14-day long strike at Chile’s Chuquicamata mine, and power shortages and a tax reform in Zambia weighed on output of the red metal, which will likely lend support to prices going forward..

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