Chile’s mining woe supports #copper prices - FT.com

Chile’s mining woe supports copper prices

“Declining ore grades” is not a phrase to set the heart aflutter. Even investors in the metals and mining sector may struggle to get excited about the subject after years of hearing it being deployed as a justification for higher prices.

But the issue has rarely been such a potent force in the market. The fall-off in ore quality at ageing mines is behind a stagnation in copper production in Chile, the world’s top miner of the metal with a third of global output, since 2006.

The start of this year has seen an acceleration of the trend: Chilean copper production was down nearly 8 per cent year on year in January, and by about 20 per cent from December.

That is a shockingly large number. To put it in context: the drop in Chilean production in January is equivalent in terms of its impact on the copper supply-demand equation to a 5 percentage point acceleration in Chinese consumption growth.

Analysts have been scratching their heads ever since the headline numbers were reported a fortnight ago by INE, Chile’s statistics institute, to determine what could be behind the sharp decline.

The grim reality is that no single factor drove the fall: instead, according to mine-by-mine data recently published by Cochilco, Chile’s state copper commission, nearly every large mine in Chile suffered a fall in production in January from December. Most of Chile’s largest mines saw double digit percentage falls in output year on year.

Read the rest of the article online here: Chile’s mining woe supports copper prices - FT.com

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