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Chile Commodities June 2023

Chile: Copper prices rise in June; copper output falls by double digits in May

Copper prices rose in June to USD 8,397 from the prior month’s USD 8,243, and tracked above USD 8,000 in early July. Meanwhile, the latest data shows that Chilean copper output fell 14.0% in annual terms in May, following a 1.1% decline in April.

Copper prices are seen averaging around their June level in H2. On the supply side, Chilean copper output will continue to be constrained ahead by declining ore grades and water shortages, which will be only partly offset by some new projects due to come online. The combination of lower average copper prices this year compared to last, soft domestic copper output, sluggish economic momentum and high social spending demands will lead to a renewed fiscal deficit and a consequent rise in the public-debt-to-GDP ratio this year.

In the legislative arena, the updated mining royalty approved by parliament in May will increase the mining sector’s tax burden to levels above those seen in other key producers such as Peru or Canada. This could make Chile relatively less attractive as an investment destination going forward. On the other hand, the end to royalty-related legislative uncertainty and the large right-wing majority in the council tasked with drawing up a new constitution should be positive for mining firms’ sentiment.

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