Chile: Copper prices stay broadly stable in April, but dip in early May
May 11, 2022
Copper prices were roughly unchanged in April, coming in at USD 10,174 per ton on average, compared to March’s USD 10,231 per ton. Moreover, prices were 9.7% higher in April than in the same month of the prior year. However, prices fell in early May, sitting at USD 9,359 on 11 May.
On one hand, the April reading was linked largely to tight supply. The latest available data showed that Chile’s copper output tumbled 6.0% in year-on-year terms in March 2022—the eighth straight monthly contraction—while around 20% of Peru’s copper output was taken offline due to social unrest. Peru’s Cuajone mine suspended operations at end-February, while Las Bambas followed suit in April. On the flipside, global demand conditions softened due to tightening monetary policy and lockdowns in China, with world manufacturing output falling for the first time in 22 months in April according to the JPMorgan Global Manufacturing PMI. The slide in prices heading into May was likely driven by ongoing demand weakness and greater supply optimism, as the Cuajone mine restarted production.
Copper prices are seen ebbing slightly going forward as global growth slows. However, sustained demand from the electric vehicles and renewable energy sectors should provide some support. Domestically, the current administration will place a greater focus on environmental protection over boosting copper output. In a speech following his election, President Boric declared his opposition to the USD 2.5 billion Dominga mining project, for instance, while the government recently rejected Anglo American’s bid to expand its Los Bronces mine. An adjusted mining royalty bill is also under discussion in Congress, while the new constitution could further impede private mining operations. That said, in May, a proposal to severely restrict private participation in the mining sector was rejected in the constituent assembly.
Author: Oliver Reynolds, Economist