Codelco, the world's largest copper supplier, saw its copper output drop by 9.3% in the last quarter compared with the same period last year, which is the latest example of the challenges faced by the metal market.
The results released by Chile's state-owned mining companies last Friday reflect that Chile's output in 2022 is disappointing. In addition, due to the decline in ore grade, water restriction and labour union protests, Cochilco expects that the country’s annual output will drop by 3.4%.
The global mining industry is struggling to cope with the logistics challenge brought by the pandemic, which is aggravated by the Russia-Ukraine conflict and China's anti-pandemic restrictions, all of which happened during the period of soaring costs and falling prices.
In the second quarter, Codelco produced 371,000 mt of copper, lower than the same period last year when the figure was 409,000 mt. The company's revenue dropped sharply as commodity prices plummeted due to the economic recession.
Cochilco said that as concerns about global inflation and China's COVID-19-related restrictions weakened, copper prices are expected to rise in the rest of 2022. However, the agency also pointed out many risks, including the slowdown of the global economy that exceeded expectations, and the unexpected rise of CPI, which may stimulate further tightening of monetary policy.
Although the copper market is expected to see a slight surplus because of the weakening of demand and the rising supply from the Democratic Republic of Congo, the long-term copper market is still promising owing to the demand for battery metals from the development of clean energy.
At the same time, as the economy slows down, the disappointing supply may help curb weak consumption. Oreeconomy grade in Chile, which has the largest copper reserves in the world, has been steadily declining, which means that more ore needs to be mined to produce the same amount of copper, and the costs become higher.
