With the price of copper reaching a 10-year high thanks in no small part to China’s insatiable appetite, Chile, the world’s leading producer, faces a “unique” opportunity, experts said.
Copper on Wednesday rose to US$4.21 per pound on the London Metal Exchange, meaning that it has doubled its price since March last year.
Experts say that its price, spurred by demand from China, could beat all records in the coming weeks, surpassing its previous high of US$4.60 in February 2011 and potentially rising above US$5 per pound.
Photo: AFP / CODELCO / Olivier Llaneza
“The intensity of consumption of primary materials in China has intensified due to the COVID-19 pandemic,” said Juan Carlos Guajardo, director of mining consulting company Plusmining.
China, which buys almost half of the world’s copper production, is trying to become the “true factory of the world,” he said.
On top of Chinese demand, copper purchases are also on the rise due to its use in renewable energy and electric mobility.
In addition, a weakened US dollar means that raw materials priced in the US currency are cheaper for investors using other currencies, and stimulus packages to reboot economies ravaged by the pandemic have flooded the global market with liquidity.
At the same time, there has been a reduction in investment in the supply side of the mining industry since the boom years of 2003 to 2013 — and the subsequent lack of new expansion plans of existing mines has resulted in less copper on the market and higher prices for Chile.
All in all, the conditions have created a favorable scenario for Chile’s main export.
Chile produces close to one-third of the world’s copper, and copper represents 10 to 15 percent of national GDP.
“The rise in the copper price gives Chile a unique opportunity to keep developing the mining sector, increase production capacity and thus meet the expected rising demand,” Chilean Minister of Mining Juan Carlos Jobet said.
The increase in price “could mobilize more investment in the mining sector and that could mean greater employment” during a year in which Chile would be hoping to return to economic growth after GDP last year fell by 6 percent due to the pandemic, Chilean Minister of Finance Rodrigo Cerda said.
Last year would have been a lot more painful for Chile had the copper industry been forced to shut down like many other sectors during a pandemic-imposed lockdown.
However, given that the main mining sites were far from the infection hot spots, the copper industry was spared the painful closures that hit commercial centers, restaurants, bars and movie theaters, among other businesses.
However, Chile must be wary of a rising supply in copper, said Marcela Vera, a researcher at the University of Santiago.
Given its use in renewable energies and potentially limited supplies, it would be counterproductive for Chile to produce greater amounts of copper that bring down prices when the metal could become so precious in the future.
“What Chile needs to do sovereignly is to generate a reduction in the offer so the prices adjust,” Vera said.
Increased production would lead to falling prices and a shorter lifespan for the metal.
“Copper is not a renewable product and it won’t be around for ever,” Vera said.
France cannot afford to ignore the third credit-rating reduction in less than a year, French Minister of Finance Roland Lescure said. “Three agencies have downgraded us and we can’t ignore this cloud,” he told Franceinfo on Saturday, speaking just hours after S&P lowered his country’s credit rating to “A+” from “AA-” in an unscheduled move. “Fundamentally, it’s an additional cloud to a weather forecast that was already pretty gray. It’s a call for lucidity and responsibility,” he said, adding that this is “a call to be serious.” The credit assessor’s move means France has lost its double-A rating at two of the
Jensen Huang (黃仁勳), founder and CEO of US-based artificial intelligence chip designer Nvidia Corp and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) on Friday celebrated the first Nvidia Blackwell wafer produced on US soil. Huang visited TSMC’s advanced wafer fab in the US state of Arizona and joined the Taiwanese chipmaker’s executives to witness the efforts to “build the infrastructure that powers the world’s AI factories, right here in America,” Nvidia said in a statement. At the event, Huang joined Y.L. Wang (王英郎), vice president of operations at TSMC, in signing their names on the Blackwell wafer to
AI BOOST: Although Taiwan’s reliance on Chinese rare earth elements is limited, it could face indirect impacts from supply issues and price volatility, an economist said DBS Bank Ltd (星展銀行) has sharply raised its forecast for Taiwan’s economic growth this year to 5.6 percent, citing stronger-than-expected exports and investment linked to artificial intelligence (AI), as it said that the current momentum could peak soon. The acceleration of the global AI race has fueled a surge in Taiwan’s AI-related capital spending and exports of information and communications technology (ICT) products, which have been key drivers of growth this year. “We have revised our GDP forecast for Taiwan upward to 5.6 percent from 4 percent, an upgrade that mainly reflects stronger-than-expected AI-related exports and investment in the third
RARE EARTHS: The call between the US Treasury Secretary and his Chinese counterpart came as Washington sought to rally G7 partners in response to China’s export controls China and the US on Saturday agreed to conduct another round of trade negotiations in the coming week, as the world’s two biggest economies seek to avoid another damaging tit-for-tat tariff battle. Beijing last week announced sweeping controls on the critical rare earths industry, prompting US President Donald Trump to threaten 100 percent tariffs on imports from China in retaliation. Trump had also threatened to cancel his expected meeting with Chinese President Xi Jinping (習近平) in South Korea later this month on the sidelines of the APEC summit. In the latest indication of efforts to resolve their dispute, Chinese state media reported that
RSS