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Chile Commodities June 2018

Chile: Copper prices hit a four-year high at the start of June, before dropping substantially

Copper prices surged to an over four-year high on 8 June, but have trended firmly downward since, dropping to multi-month lows at the end of the month amid a stronger U.S. dollar and intensifying trade war concerns. Prices averaged USD 3.16 per pound (equivalent to USD 6,956 per ton) in June, up from the previous month’s USD 3.10 per pound (equivalent to USD 6,825 per ton). Despite plummeting in the second half of the month, copper prices in June were still 21.8% higher than in the same month last year.

Prices peaked at the beginning of June, boosted by a weak dollar and fears that Chile’s Escondida copper mine, the world’s largest, would be crippled by industrial action. Nevertheless, concerns of labor-related supply disruptions in key producing regions moderated through June. Coupled with fears of a full-scale trade war between the U.S. and its trading partners, this exerted strong downward pressure on copper prices. Longer-term supply fears were further quelled in late June by the Chilean government’s announcement of a USD 1 billion capitalization into state-owned mining firm Codelco.

Escalating trade tensions between the U.S. and China have weighed on global commodity prices, and copper has been particularly sensitive due to its reliance on the Chinese market, the world’s leading copper consumer. Growth momentum in the Chinese manufacturing industry began to show signs of cooling in June, even before the implementation of U.S. tariffs at the beginning of July. Prices dipped further at the beginning of July, dropping to a nearly eight-month low in the first week of the month.

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