Chile: Copper prices rise in July; copper output falls again in June
Copper prices rose in July to average USD 8,477, up from the prior month’s USD 8,397. Moreover, prices traded even higher in early August, at close to USD 8,600. Copper prices were likely supported in recent weeks by hope of Chinese stimulus and tight Chilean supply: The latest data shows that Chilean copper output fell 0.9% in annual terms in June, following May’s 14.0% drop and marking the fifth straight monthly decline.
Copper prices are seen averaging slightly lower than their current levels by the end of this year. Demand from developed markets will likely flag due to high interest rates, and our panelists do not see a major Chinese stimulus package as likely, suggesting that recent stimulus hype in commodities markets may have been excessive.
On the supply side, Chilean copper output will continue to be constrained ahead by declining ore grades and water shortages. The combination of lower average copper prices this year compared to last, soft domestic copper output, sluggish economic momentum and high social spending demands will lead to a renewed fiscal deficit and a consequent rise in the public-debt-to-GDP ratio this year.