Codelco, the world’s biggest copper producer, has some calming words for traders concerned that a COVID-19 resurgence in Chile would disrupt supply of the metal.
“Definitely not,” company chairman Juan Benavides said when asked if a tightening of restrictions this week would interrupt the company’s operations or shipments.
Codelco lifted first quarter output despite a surge of infections in Chile, he said in an interview.
“So far this year, we have a production increase,” he said.
Through the COVID-19 pandemic, Chilean mines that account for one-quarter of global supply have been able to maintain high levels of production by introducing shift changes, testing and tracing, and delaying nonessential activities. That has been a blessing for Chinese smelters hungry for material amid supply disruptions elsewhere and recovering demand.
Still, in the past several months, Chilean output has come in slightly lower than year-ago levels, suggesting mines such as BHP Group’s Escondida might be experiencing fatigue from the COVID-19 measures.
The industry is facing another stern test. Despite rolling out one of the fastest vaccination programs in the world, Chile has seen cases and hospitalizations jump to records, prompting authorities to close borders to citizens and foreign residents, and require truck drivers to present a negative test before entry.
While the government said that the new measures would not disrupt mining or sea transport, supply jitters triggered a brief rally for copper to a two-week high on Tuesday.
“The program we initiated at the beginning of this pandemic, which we’ve perfected over time, has given us excellent results,” Benavides said.
While there might be nervousness over the border closures, “in no way does that affect our operations or productive processes,” he added.
Although Chile is yet to disclose copper output for last month, on Wednesday the central bank reported that export revenue from the metal reached an eight-year high last month, supporting Benavides’ upbeat tone.
Copper surged to the highest in almost a decade in late February on the prospect that vaccinations and stimulus would unlock a sharp global recovery. Since then, prices have eased amid fresh lockdowns and a rising US dollar. The metal was little changed yesterday at US$8,922.5 per tonne by 10:30am in Shanghai.
Still, many analysts see a further rally as demand rebounds globally and supply falters. Bolstering the outlook is the Biden administration’s US$2.25 trillion US infrastructure plan.
The metal’s rally is also being accompanied by a surge in demand for goods as the pandemic stymies services.
While copper is well supported going forward by the shift toward clean energy and electro-mobility, demand for goods might wane as economies normalize and services open back up, Benavides said.
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