Chile, the world’s largest copper producer, saw its lowest monthly output in nearly a decade in February. According to the national statistical service INE, there were extracted only 378.5 thousand tons of metal. This is 8.5% less than in January and 4.8% lower than in February last year. The last time such low levels were recorded was in March 2017, when work was paralyzed by a strike at BHP’s giant Escondida mine.
There were no major production shutdowns last month. However, seasonal factors played a role: it rained in the north of the country, where the main copper mines are located, and stormy weather on the coast made logistics difficult. But the main reasons are deeper. Over the past seven months, production in Chile has been gradually declining. Long-standing problems are hampering the process: a drop in the metal content of ore and protracted projects to convert quarries to underground mining, which were supposed to open up access to richer areas.
Chile produces about a quarter of the world’s copper production, so any disruptions here are immediately reflected in the global market. In January, copper prices reached a new historical high, exceeding $14 thousand per ton. In February, quotes began to decline, and after the escalation of the conflict in the Middle East, they fell even further. However, the fundamental picture remains tense: metal reserves on exchanges are low, and new deposits are introduced rarely and with great delay.
The February numbers from Chile are a link in a chain of sequential deterioration in supply that creates a structural copper deficit in the medium term. And until the largest producer solves problems with ore quality and modernizes assets, the market will live in constant anticipation of the next recession.
Source: mining.com
Image: Glencore
