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Chile Commodities September 2019

Chile: Copper prices marginally up in September

Although copper prices jumped in the first half of September on optimism over trade talks, they fell markedly thereafter, weighed on by lackluster economic data from China. On average, prices for the red metal rose to USD 2.61 per pound in September (equivalent to USD 5,759 per ton), up marginally from August’s average price of USD 2.59 per pound (equivalent to USD 5,705 per ton). Furthermore, copper prices were 4.8% lower than in the same month last year and down 3.0% on a year-to-date basis.

Softening trade tensions between the U.S. and China nursed copper prices out of a two-year low slump in early September. The recovery proved short-lived, however, as dismal Chinese manufacturing data released in the middle of the month signaled a faster-than-expected slowdown in the world’s largest consumer of the red metal. This, coupled with lackluster manufacturing activity in the U.S. and Germany, weighed on demand for copper and thus on prices. In addition, prices dipped further by the end of the September, dragged on by a stronger dollar and uncertainties stemming from Donald Trump’s impeachment inquiry.

Markets have yet to price in tight supply, instead focusing on slowing global growth and trade war-related sentiment. According to the International Copper Study Group (ICSG), global copper output dropped in the first half of the year, dragged by falling supply in Chile and Indonesia. Nevertheless, Chilean miner Codelco, the world’s largest producer of copper, issued 10-year and 30-year dollar-denominated bonds on 24 September as it seeks to move forward with an overhaul of its mines in order to meet an expected rise in the demand in the medium- to long-term. Particularly, the usability of the red metal in new technologies, including electric vehicles and green-energy projects, is projected to fuel demand and, in turn, prices.

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