Chile: Copper prices largely stable in November
November 30, 2018
Copper prices remained broadly stable in November. Prices averaged USD 2.81 per pound (equivalent to USD 6,192 per ton) in November, up slighty from the previous month’s result (October: USD 2.82). Nevertheless, copper prices were still 9.2% weaker on a year-on-year basis.
The stronger U.S. dollar and weak Chinese export data, highlighted by copper exports falling by nearly a fifth on a monthly basis in October, weighed on prices through mid-November. Ongoing uncertainty about the U.S.-China trade talks continued to exert downward pressure on prices through the end of November. Nevertheless, strong fundamentals helped offset downward pressures and propped up copper prices in the second half of the month. Particularly, the supply outlook of the red metal tightened as Chinese copper smelters signaled their interest to invest in mines abroad, amid a crackdown on pollution by officials at home.
Meanwhile, copper exports in Chile, the largest copper-producing country in the world, rose from the previous month in the first three weeks of November, signaling a return to expansion after subdued activity in the first three quarters of the year. Chile’s Codelco, the world’s largest copper producer, recently reported a 3.0% year-on-year drop in copper production in the same period. Meanwhile, BHP’s Spence copper mine—the company’s second largest after Escondida—returned to normal operation after a labor strike was announced at the end of November, following layoffs earlier in the month.
Copper prices remain closely linked to growth of emerging markets, particularly China. Moreover, given copper accounts for about 80.0% of the country’s exports to China, the Chilean mining sector also remains heavily reliant on Chinese demand. However, despite the build-up of downside risks to China’s GDP outlook, the usability of the metal in new technologies, including renewables and electric cars, should drive demand and bolster prices in the medium-term. Chilean copper production, meanwhile, is expected to grow mildly next year, amid a positive global copper price outlook and waning risks of mine strikes.
Chile Copper Prices Forecast
Our panelists expect copper prices to average USD 2.99 per pound in 2019 and 3.02 in 2020.
Author: Almanas Stanapedis, Economist