In the midst of discussions to increase the tribute to the industry, the red metal broke the record it had held since 2011 and marked a new milestone in its history.
“Very good news for Chile.” That was the impression of the authorities after copper touched a price of US $ 4.7 per pound on the London Metal Exchange, breaking the historical record that it held from the beginning of 2011 until this Friday.
And the projections do not rule out that the commodity will rise more, even banks like Goldman Sachs foresee that the metal could become the “new oil” and reach US $ 6.8 per pound, amid the global context that advances towards an energy transformation, where natural resources, and especially copper, will be the protagonists.
In this sense, Juan Raúl Godoy, head of analysis at the investment company XTB Latam pointed out that “long-term copper demand expectations are at their highest levels due to the plans of the governments of developed countries that seek to focus in green energy to reduce the use of oil “.
However, Emol spoke with various experts on this matter, who indicated that in addition to the existence of an environment conducive to economic recovery, led by the United States and China – the main consumer of the red metal -, which favors the main Chilean export, elements have emerged specific that suggest that its appreciation could even reach US $ 5 per pound in the short term.
In fact, Juan Carlos Guajardo, executive director of Plusmining pointed out to this medium that, although “copper has a fairly clear upward trend established several months ago, what we are experiencing these days is because specific factors have been added, has focused on supply. There is less production in Chile and in Peru there is not much conviction of the recovery either, there are rumors of the arrest of a mine in Zambia (…) and without a doubt that the political issue is making a lot of noise “.
The latter is based on the political processes that our country and Peru are going through, nations that concentrate about 40% of the production of the commodity worldwide.
Point referred to by Daniela Desormeaux, director of studies at Vantaz Group, who explained that “the price we are seeing responds to a supply situation, fears and also what Peru is experiencing. Let us remember that in Peru there are two candidates with quite a lot of ideas. opposite, and nowadays the polls show that as a majority the candidate who aims to nationalize mining would be winning. So obviously there is a political factor of uncertainty that is weighing heavily. ”
Similarly, Ricardo Bustamante, Head of Trading Studies at Capitaria, indicated that “with the bullish arguments, the copper ceiling will probably be seen in a few more years, which should continue to support a boost to at least US $ 5 the pound for the next several weeks. ” Along the same lines, Desormeaux said that “the ceiling could reach US $ 5 a pound, and it could eventually exceed that.”
High prices and the mining royalty
It was this Thursday that the Chamber of the Chamber of Deputies sent the bill establishing a mining royalty to the Senate. Specifically, the initiative seeks to establish a tax for the exploitation of copper, lithium and all minerals by companies, equivalent to 3% of the value of sales, a rate that would rise as prices rise. of the products grow. The objective? Increase tax collection.
However, the progress of the measure has generated concern both in the industry and in the Executive, due to the impact that it could cause on the competitiveness of Chilean mining compared to countries dedicated to the sector, such as Peru and Australia.
In that sense, after copper set a historic price this Friday, the biminister of Energy and Mining, Juan Carlos Jobet stressed that “if this price is maintained it will mean, with the royalty in force today, additional income for the State for almost US $ An extra $ 10 billion (this year), which will help us meet the urgent social needs resulting from the pandemic “, and called for a serious discussion on the future of the sector and its contribution.
On the other hand, a Bloomberg analysis assured that the tax measure “at the very least, would delay any new capacity, extending the long period it takes to start a new mine”, while “Chile’s production could begin to decrease to 5 million tons “. In addition to damaging the investment.
In this context, the director of studies at Vantaz Group pointed out that although establishing a royalty with these characteristics may mean higher income, “the negative impact that it may have is not something that we will eventually see today, but rather that we will see it in a medium and long term. Probably new projects that mean exploiting deposits, with lower grades, may be, for example, that they are not carried out “.
“This is going to have an impact on the future supply, an offer that is already quite restricted,” she stated.
For his part, Godoy warned that despite the fact that “this initiative will generate greater resources for the fiscal coffers, the important thing in the debate is to reach certain balances,” and added that it should aim at “the mining industry contributing resources to the country in a fair without discouraging investment, which could be risky for the future. ”
But he stressed that “considering that the price of copper is at historical highs and has quite optimistic projections in the medium term, it is necessary to make an adjustment to be able to collect more taxes and in this way Chile can face a better fiscal scenario.”
However, although Guajardo anticipates a “very good cycle, which we are already having,” he called for caution, especially considering that the debate over a new tax is taking place within the framework of a significant price hike, “which may encourage the visions to be somewhat unreal and that this is a cyclical market. A law lasts for a long time, high prices not necessarily. ”
As a result of this, Desormeaux closed stating that “one thing is what are the levels that the price of copper could reach and then if those levels are sustainable over time” and assured that although the commodity can continue its bullish streak, in the long term foresees an appreciation close to US $ 4 per pound.