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Chile Commodities February 2022

Chile: Copper prices rise in February

Copper prices increased in February, coming in at USD 9,943 per ton on average, compared to January’s USD 9,780 per ton. Moreover, prices were 17.4% higher in February than in the same month of the prior year.

The higher February reading was linked largely to a fairly tight supply situation. The latest available data showed that Chile’s copper output tumbled 7.5% in year-on-year terms at the outset of 2022, while production at Peru’s Las Bambas mine has been hit by social unrest. Moreover, sanctions on Russia likely raised concerns about the impact on the country’s copper output. On the other hand, the Russia-Ukraine conflict has darkened the global demand outlook for the metal somewhat.

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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