SMM1, March 19: 2018 looks like a very good year for Chilean copper mining companies. As China imports waste and exports from neighbouring Peru, buyers in China will become more dependent on the supply of the world's largest producer, according to BMO capital markets.
While more licences may be issued, Chinese buyers are likely to turn to importing more copper concentrate, the bank said.
According to BMO, 48 per cent of China's copper imports will be in the form of copper concentrate in 2018, almost double the proportion a decade ago.
Analysts say Chile will take on another heavy responsibility this year as far as China's increase in imports of concentrate is concerned. After a period of strong growth, Peru's exports began to fall this year.
Chile will remain the largest supplier of copper concentrate to the Chinese market, but this year it will face more renewal of labour contracts and the supply of Chinese demand is likely to become difficult. Any major damage to mine supply could push the copper market into shortage. Escondida, the world's largest copper mine, continued to perform strongly with a prolonged strike earlier this year.
The risk of a strike in Chile, the largest copper producer, has risen as concerns about the threat of supply disruptions from wage negotiations have been the main reason copper prices hit a nearly four-year high in December.
Analysts at ING, a Dutch bank, say the market is prematurely speculating on prices by supplying end-of-life risk.
Analysts Hamza Khan,Warren Patterson and Oliver Nugent said in an email Wednesday that the vast majority of labor contracts that need to be renewed will not expire until the second half of the year, in a high-price environment. The miners will most likely push for an early and peaceful settlement of the pay negotiations.
Translated from Bloomberg by Zhou Linxin, (SMM) of Shanghai Nonferrous Metals Network