RIO DE JANEIRO, BRAZIL – The price of copper, of which Chile is the world’s leading and Peru the number two producer, recorded its fifth consecutive fall on Friday, June 18, and recorded its worst week since March 2020, following China’s warning it would release strategic reserves to reduce inflationary pressure on mining commodities.
The three-month copper on the London Metal Exchange (LME) on Friday lost 2.3% to US$4.17 per pound, the lowest level since April 15, reported the Chilean Copper Commission (Cochilco).
With respect to last Friday, the price plummeted 7%, which is its worst week since March 20, 2020, when the coronavirus wreaked havoc in China and began to spread around the world, and the metal fell 12% in just one week.
Friday’s drop comes in a week when the U.S. Federal Reserve announced it would bring forward the hike in the monetary policy interest rate to 2023 instead of 2024, and China said it would sell state reserves to cap prices.
“China’s decision to release strategic reserves of copper and other metals abruptly changed expectations for the copper price in the short term,” Cochilco explained.
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The average price of copper in the month thus fell back to US$4.44 per pound, and the annual average climbed to $4.11, far from the historical maximum reached last May 10 ($4.86 per pound) and which surpassed the records of the 2011 “supercycle”.
Despite the announcements in the US and China, “the current scenario of the copper market continues to be characterized by the vulnerability of supply, low inventories in metal exchanges, expectations of a copper deficit for this year, the recovery of developed economies and the accelerated growth in the production of green energy and electromobility”, Cochilco indicated.
“The short and medium-term demand potential remains intact, which should continue to support the price of copper,” the institution added.
Chile, which accounts for 28% of world copper production and is debating the possibility of implementing a royalty on the metal’s extraction, produced a total of 5.7 million tons in 2019, slightly down from a record 5.8 million in 2018.
The red metal, fundamental in energy transmission, has become the main Chilean product and concentrates almost 50% of exports.
Mining operations in Peru, the number 2 copper miner worldwide, are also affected by the price collapse.
In the country, where since 2006 there has been a specific tax on mining activities that applies to profits but not to exploitation, giants such as BHP, Anglo American, Codelco, and Antofagasta Minerals operate but also a large number of small and medium-sized companies.