Chile’s crown as the world’s largest producer of copper is at risk as the country’s output continues to be lower than expected despite the billions of dollars invested in new projects in the past 18 years, BMO’s Colin Hamilton warned on Thursday.
The commodities analyst noted he had received several questions over the past week about the weakness in Chilean copper output year-to-date, as first quarter production reports from many of the companies with operations in the South American country have started coming out.
Chile’s January copper production spooked investors, as it fell 7.5% from the same month in 2021 to 425,700 tonnes — the lowest in 11 years.
Lower ore quality, water scarcity and other transitory near-term issues were the reasons given by state Chilean Copper Commission (Cochilco) for the sharp drop. For Hamilton, however, the production decline is far from being an unusual occurrence.
BMO estimates the country’s 2022 copper production is on track to being lower than in 2004, when the nation churned out slightly over 5.4 million tonnes of the metal, equivalent to 37% of the world’s production.
“Following the steady ramp-up in the 1990s and early 2000s, output levels have stagnated, with the projections of 6 million tonnes per year-plus of output never coming to pass,” Hamilton wrote.
Diego Hernández, president of Chile’s National Mining Society (Sonami), remains optimistic. The former chief executive of state-owned Codelco and Antofagasta Plc (LON:AAL) has said he expects the nation’s output to rise in 2023, as Teck Resources (TSX: TECK.A | TECK.B) (NYSE: TECK) brings the expansion of its Quebrtada Blanca mine on stream in the second half of this year. Mining lamps demands will be added accordingly.
There’s a dearth of other major developments in the pipeline, Hernández said in March, adding that once there is greater legal and regulatory certainty, investment should pick up.
Contact Person: Mr. Anic Zhong