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Despite the strong volatility that the markets have experienced this year, hit by the coronavirus crisis, copper, the country’s main export, has managed to better weather the effects of the pandemic, consolidating an upward trajectory, which led to the metal to reach this Wednesday maximum in more than two years.
The spot price closed up 2.04% at US $ 3,154 a pound on the London Metal Exchange, with which it completed four consecutive sessions of increases, in which it accumulated an increase of 4.03%.
Thus, it reached its highest level since June 18, 2018 and had its highest daily rise since August 19 of this year, adding a gain of 12.09% so far in 2020.
In this way, since its minimum of March 23 (US $ 2,094), when it was at its lowest level in 3 and a half years, it has recovered 50.6% of its value.
In this regard, the Minister of Mining, Baldo Prokurica, highlighted the positive impact for the country. “The period we are living in, after a complex period in copper prices, is very good news for Chile and for the fiscal coffers. because, as we have said repeatedly, for every penny of a dollar that the pound of copper rises, there is much higher income that will be able to strengthen an economy that, as the Minister of Finance has permanently stated, is being greatly affected by the corovanirus “
“These increases mean that we are going to have better income and we are going to be able to support the commitments that the government has made with those families that have lost everything and that add up to more than US $ 30 billion,” he added.
The reasons for the recent progress are partly related to specific factors, such as the suspension of operations at the Candelaria mine in Chile, in the midst of the strike carried out by its workers in the framework of the collective bargaining process, and progress in the negotiations to implement a new fiscal stimulus plan in the US, but there are also more structural elements that, according to analysts, could lead to sustaining metal prices.
In this sense, Juan Carlos Guajardo, Executive Director Plusminig, He said that in addition to these factors, signs of strong demand from China, the world’s largest consumer of the metal, continue.
“In particular, China reported a new import quota for copper scrap (5,980 metric tons of copper scrap), a relevant amount that reveals the great need to increase the supply of all forms of copper, evidence of the high demand ”, he indicated.
For her part, the director of studies at Vantaz consultant, Daniela DesormeaxThe recovery in China also coincides with the effect.
“The rise is mainly due to demand factors. China showed higher than expected growth in the third quarter of this year and industrial activity is showing great dynamism. The production of metals such as steel and aluminum has reached record levels in recent weeks, which has caused increases in commodities such as iron, nickel, copper and others, “he said.
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In fact, after being the first country affected by the pandemic, China is precisely the one that is leaving its effects behind the fastest, and it is expected that this year it will sustain the world economy.
About Francisco Acuña, Senior Consultant, at CRU ConsultingHe pointed out that “unlike the rest of the world that will see a drop, China is expected to close the year with a 2% growth in refined copper consumption. This is led by the construction, infrastructure and electricity grid sectors, which the post-Covid stimulus package impacted more strongly than expected ”.
On the other hand, he added that there has been a large import of copper that is thought to be destined for the strategic reserves of the Chinese government.
“This, added to the fact that stock inventories are at low levels, and a weaker dollar also creates a bullish scenario for copper,” he added.
For his part, Desormeaux indicated that “obviously supply factors are added to this. In the case of copper, as a result of the pandemic, the mine’s copper production is estimated to fall between 3% and 5% on average (compared to 2019) and on the other hand the availability of scrap has also been affected, which reduces the supply of recycled copper ”.
In this context, although future market movements will continue to be marked by the behavior of the pandemic, copper could continue to advance.
“We expect the upward trend to continue until next year, when we expect an annual average price to remain around US $ 3.10 a pound for 2021 as a base case,” said Acuña.
Regarding the short-term prospects, he argued that, in order to maintain the upward trend, the recovery in China would have to be sustained, and the recovery in Europe and the United States should be accelerated, for which the possible approval of the fiscal aid package in this last country could have a relevant impact.
“On the supply side, if there were to be additional disruptions or further delay in projects under construction as a result of second waves of Covid in Chile or Peru for example, an increase in the price of copper would also be expected. One factor within this is the stoppages due to collective bargaining, which considering what happened in Candelaria, could also impact other operations in Chile and therefore maintain uncertainty in the market ”, he stated.
For his part, Juan Carlos Gujardo stressed that “this week the London Metal Exchange Week is taking place, which brings together a large part of the most influential players in the world copper industry, and so far the panorama is very favorable for copper, which brings optimism in the future price. This may be an additional factor for the strong upward trend in price. “
