By Carolina Curiel (ScrapMonster Author)

December 01, 2015 01:58:22 AM

SANTIAGO (Scrap Monster): Chile’s state-owned mining company, Codelco has reported increased production during the initial nine-month period of the year. However, net profits plunged by almost 47% from same period in 2014, mainly on account of sharp fall in copper and molybdenum prices.

The production from Codelco’s own mines totaled 1.259 million mt during the first nine months of the year, marginally higher by 2.3% when matched with the production of 1.231 million mt during the same period in 2014. The sales dropped from $7.7 billion during Jan-Sep ’14 to $6.47 billion during the initial three quarters this year. The net profits plunged by nearly 47% to $1.22 billion during the Jan-Sep period this year, as compared with $2.3 billion in the year-ago period.

The profits plunged despite higher production and implementation of cost cutting measures, mainly due to the sharp fall in copper and molybdenum prices. The average copper prices declined almost 18% over the year to $2.59 per lb. Meantime, molybdenum prices plunged by nearly 40% to $16 per kg.

According to Codelco management, the plan to trim expenditure by $1 billion is running ahead of schedule. The plan implemented at the beginning of the current year has resulted in cost savings of $1.19 billion during January to September. The company will continue its efforts to streamline its operations by boosting productivity and implementing tighter cost control mechanisms. It may also consider the option of halting certain loss-making smelters. At the same time, it does not plan to permanently close operations as it expects copper demand to recover in the medium term.

Meantime, the International Copper Study Group (ICSG) has revised the copper forecast for 2016. ICSG in its earlier forecast during April this year had stated that copper market is likely to see supply surplus of 230,000 mt in 2016. However, in the wake of ongoing production cutbacks and mine disruptions at various mines across the world, the supply is expected to fall to a deficit of nearly 130,000 mt during next year. ICSG has also reduced its copper surplus forecast for 2015 from earlier 360,000 mt to just over 41,000 mt.