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Chile Commodities December 2022

Chile: Copper prices pick up in December; Chilean copper production contracts in November

Copper prices rose in December to USD 8,371 per metric ton from the prior months USD 8,050 per ton. Prices were down 12.4% in December from the same month of the prior year.

Higher prices last month were driven by Chinas decision to lift virtually all Covid-19 restrictions. Moreover, the Chinese authorities announced their intention to prioritize economic growth this year, which spurred hopes of further stimulus measures. Both developments boded well for demand, given that China accounts for around half of global copper consumption. Moreover, supply was likely tight: Mass protests in Peru fed concerns over transportation delays, while Chiles copper output fell 5.5% year on year in November. Chilean copper output has been dampened in recent months by a deterioration in ore quality, water shortages and lower refining rates.

Looking forward, copper prices are forecast to average below USD 8,000 per ton this year, as economic momentum in developed economies slows. Together with a likely contraction in Chilean economic activity and high social spending demands, this will contribute to a widening of the fiscal deficit in 2023.

Regarding copper output, the governments investment plan announced in September and the rejection of the proposed constitution—which would have increased environmental regulations—are positive for the mining sector. However, uncertainty is still being generated by an updated mining royalty bill currently in Congress, which is set to increase companies tax burdens and could deter investment. The lack of clarity over the future constitutional framework is a further cloud on the horizon. In any case, Chile will remain the worlds largest copper producer for the foreseeable future.

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