Codelco Output Forecasts Crumble Under Weight of Reforms, Peru’s Copper Troubles Likely to Persist

Expectations for Codelco’s annual copper production continue to be whittled down with each passing quarter. State-owned Codelco is the world’s biggest copper supplier and plays a key role in Chile’s status as the world’s leading copper exporting nation. Production costs are rising in the Chilean copper sector, as new tax reforms and government wage adjustments ratchet up pressure on the country’s miners.

To the north, Peru is also dealing with subdued growth and project delays throughout its mines. Those factors, along with political instability, have recently cost the country its status as the world’s second-largest copper exporter. South American copper largely forms the backbone of the world’s supply of the metal, but it looks like the region’s potential for output growth is wilting as demand is set to skyrocket. 

Related ETF: Global X Copper Miners ETF (COPX)

Codelco, the world’s biggest copper supplier, lowered its annual production guidance last week – the latest sign that political issues facing the state-owned miner, and Chilean copper production more broadly, could be set to exacerbate forecasted deficits of the metal in the years to come. Chile is the world’s leading nation in regard to copper exports and suppressed output throughout South America could be a very jarring prospect for a world that is in the midst of a heavily copper-intensive transition to green energy technologies.

Bloomberg reports that Codelco’s second-quarter production dropped -17% from a year earlier, and expected annual projection was cut to a range of 1.31 million to 1.35 million metric tons, down from a previous call of 1.35 million to 1.42 million. MRP previously highlighted Codelco’s ongoing woes in June, following former CEO Andre Sougarret’s departure from his post (effective at the end of June) after a tenure that lasted just a year, citing “complexities” in running the world’s leading copper supplier. No replacement has yet been named. Sougarret’s resignation followed the company’s copper production falling to a 25-year low in Q1, compounding a double-digit-percentage decline for all of 2022.

Weak production growth, or even declines, among Chilean miners appear to be ongoing as new reforms have raised the top tax rate will to 47% (up from a specific tax rate of 37%) for companies that produce over 80,000 tonnes of fine copper per year. Reforms also…