(Bloomberg) – Codelco, the world’s largest copper producer, has some reassuring words for operators concerned that a resurgence of Covid-19 cases in Chile will disrupt the supply of the metal.
“Definitely not,” said Juan Benavides, Codelco president, when asked if this week’s tightening of restrictions would disrupt the company’s operations or shipments. On Tuesday in an interview, he said that Codelco managed to increase production in the first quarter despite the increase in infections in Chile. “We are this year with an increase in production to date.”
During the pandemic, Chilean mines, which account for more than a quarter of global supply, have been able to maintain high levels of production by introducing shift changes, testing and monitoring contacts, and postponing non-essential activities. That has been a boon for material-hungry Chinese foundries amid supply disruptions elsewhere and recovery in demand.
Even so, in recent months, Chile’s production has declined slightly from a year ago levels, suggesting that mines like BHP Group’s Escondida may be experiencing fatigue from the measures taken to combat COVID-19.
Now the industry faces another ordeal. Despite launching one of the fastest vaccination programs in the world, Chile has seen a rise in the number of cases and hospitalizations to record levels, prompting authorities to close borders to foreign citizens and residents and to require all truckers who present a negative test before entering. While the government says the new measures will not affect mining or shipping, operators are not convinced, and concerns over supply helped send futures to a maximum of two weeks.
“The program that we implemented at the beginning of this pandemic, which we have perfected over time, has given us excellent results in terms of operational continuity,” said Benavides. Although there may be nervousness about border closures, “in no way does it affect us in terms of operational work or production processes.”
While Chile has not yet released copper production figures for March, on Wednesday the central bank reported that earnings from the metal’s exports hit an eight-year high last month, supporting Benavides’ optimistic tone.
Copper rose to its highest level in nearly a decade in late February as vaccines and stimuli could underpin a strong global recovery. Since then, prices have fallen amid further lockdowns and a dollar appreciation.
However, many analysts anticipate a further rebound as demand recovers globally and supply falters. The Biden Administration backs the outlook with a $ 2.25 trillion infrastructure plan.
The metal’s recovery is also accompanied by an increase in demand for goods as the pandemic hampers services. While copper is well supported for a future of shift toward clean energy and electric mobility, demand for goods may decline as economies normalize and services open up, Benavides said.
Metal’s fundamentals are strong, but that doesn’t mean it has entered a new supercycle, he said. Demand is likely to grow 2% -3% per year for the next five years, outpacing the increase in supply of approximately 2%. That compares with China’s double-digit consumption growth in the last big price spike.
“There could be a small deficit there, but the markets also always adjust, they adjust for technological reasons, for substitutes,” he said. “Also, this price is an incentive perhaps to develop some projects that are marginally higher costs.”
In recent years, Codelco has participated in the strongest investment program in the copper industry after decades of underinvestment in its old deposits. A new underground mine in Chuquicamata is underway as planned, while projects in Andina, El Teniente and Salvador are on target despite the pandemic, he said.
The goal of the state-owned company is to maintain annual production at around 1.7 million metric tons.
“That, for now, is more than enough, however, we are permanently, and it is one of the central points of the strategy, seeing how to convert current resources into reserves and bring that to the production level,” he said, and mentioned more expansions. at the Radomiro Tomic and Andina mines as potential projects. “Today there is nothing defined.”
Original Note: Top Copper Miner Is Boosting Output Amid a Covid Surge in Chile
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