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Chile Commodities November 2022

Chile: Copper prices pick up in November; Chilean copper production returns to growth in October

Copper prices rose in November to USD 8,050 per metric ton from the prior months USD 7,651 per ton. Prices were down 17.3% in November from the same month of the prior year.

Higher prices last month were driven by hopes that China would soon loosen its zero-tolerance Covid-19 stance, and by the Chinese authorities extra financial support to the housing sector—China accounts for around half of global copper consumption. Meanwhile, Chiles copper output rose 2.2% year on year in October, the first increase in 15 months. Output has been dampened so far this year by a deterioration in ore quality, water shortages and lower refining rates.

Looking forward, copper prices are seen falling from their November average next year as global demand decelerates. Together with a likely contraction in domestic 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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