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Chile Commodities March 2022

Chile: Copper prices rise further in March

Copper prices increased in March, coming in at USD 10,231 per ton on average, compared to February’s USD 9,943 per ton. Moreover, prices were 13.8% higher in March than in the same month of the prior year.

The higher March reading was linked largely to fairly tight supply dynamics. The latest available data showed that Chile’s copper output tumbled 7.0% in year-on-year terms in February 2022—the seventh straight monthly contraction—while the threat of social unrest continued to hang over production at Peru’s Las Bambas mine, and Peru’s Cuajone mine was forced to suspend operations due to a blockade by local residents. Moreover, sanctions on Russia likely raised fears about the impact on the country’s copper output, including concerns that the London Metal Exchange could limit Russian copper from trading on the bourse.

Copper prices are seen ebbing slightly going forward as global growth slows and supply concerns gradually ease. Sustained demand from the electric vehicles and renewable energy sectors should provide some support though. The possible widening of the war in Ukraine is a risk to both demand and supply, while potentially tougher environmental restrictions on the mining sector under Gabriel Boric pose an upside risk due to the likely impact on supply. Boric has already declared his opposition to the USD 2.5 billion Dominga mining project, while a senate commission in January approved an adjusted mining royalty bill which would raise levies on firms. Moreover, the new constitution could also open the door to the nationalization of mining assets, according to ideas currently under discussion in the constituent assembly.

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