The country’s main export is priced at US $ 3.56 per pound, and everything seems to indicate that the positive trend will extend to 2021, accompanied by important contributions to the fiscal coffers through the payment of taxes.
A pound of copper was quoted at US $ 3.56 yesterday on the London Metal Exchange, after presenting a 0.6% rise, which brought the average annual price of the mineral to US $ 2.80. This implies an important relief for the fiscal coffers, given the increase in the payment of royalties from companies.
However, 2020 was a year of contrasts for the country’s main export, since although today it is at its highest level in seven years, during the first quarter it hit the bottom, when in March it was quoted at US $ 2.09 , from then on the jump has been greater than 70%.
The change in trend has led the metal to grow by 27.2% compared to the first day of the year, reaching the third highest annual increase in the last decade, being only surpassed by its performance at the beginning of the last supercycle in 2010 (30, 5%) and in 2017 (28.4%). Together with the above, it is the highest closing exhibited since 2012 (US $ 3.59).
According to experts, the reasons behind this important jump are directly related to the financial stimulus packages announced by the main economies of the world and to the reactivation of the Chinese economy, the main consumer of the mineral, which is driving important purchases of the mineral. even from part of the state reserve.
For the end of the year, regarding their production, Sonami foresees a lower performance than the two previous four-month periods, “due to the high comparison base, generating a slight drop in mining production, particularly in copper and gold. However, we expect the mining sector GDP to show a growth of 1% by the end of the 2020 financial year, becoming one of the few relevant economic activities that will register growth in 2020 ”, assured the president of the union, Diego Hernández.
Along these lines, the director of studies at Vantaz, Daniela Desormeaux, added that in terms of company profits, “a relevant factor that will determine the evolution in the fourth quarter will be cost management. On the one hand, an increase in this item could be observed due to higher expenses associated with the control and management of the pandemic, and on the other hand, also due to the closure of some collective negotiations.
PERSPECTIVES FOR 2021
Expectations suggest that this trend should continue into 2021, with a copper price above US $ 3.2, which is explained by the low entry of new production to a market that is practically in equilibrium.
From Goldman Sachs they pointed out in a report that the strength of the price is the first stage of a structural bull market. Looking to 2021, they expect stricter market conditions in a decade, due to a substantial deficit of 327 thousand tons, which in 2022 will be 153 thousand tons.
For his part, the executive director of the consulting firm Plusmining, Juan Carlos Guajardo, announced that in 2021 the price will be between US $ 3.3 and US $ 3.4, so “it will be a very good year, production will be marginally lower, which will be offset by price, exchange rate and cost control. As long as production is maintained at a relatively good level, the results will be very positive ”.
Along these lines, the general manager of the specialized mining firm GEM, Juan Ignacio Guzmán, added that “the price should move in a range between US $ 3.2 and US $ 3.8 per pound. The fiscal recovery plan that is going to be put into action in much of the world, as well as the expansionary plan of the United States, will have a positive influence, which could take copper to US $ 4 a pound, in a temporary manner ”.
Meanwhile, Sonami expects the mining sector GDP to grow by around 2%, with copper production close to 5.9 million tons, that is, an increase of 150 thousand tons in addition to the production estimated for 2020 , while they project an average price close to US $ 3.2 per pound.
Payment of mining taxes rises 45% as of September
During the last weeks, the companies belonging to the Large Copper Mining have delivered their results at the end of the third quarter of the year, which although they have shown mixed performances, are being driven by the larger ones.
These better results have also affected the payment of taxes made by companies in the sector, which during the period totaled US $ 3,241 million, according to a report made by the consulting firm Plusmining, a figure that is 45% higher than that seen in the same span in 2018.
The list is led by state-owned Codelco, with some US $ 1,124 million, which includes the Reserved Law, Income Tax, Specific Tax and net profits. In the private sector, the largest contributions correspond to Minera Escondida (US $ 649 million) and Collahuasi (US $ 530 million), the latter almost doubled its payment during the current fiscal year, amid their record levels of copper production.
“This is not only the price effect, but also the exchange rate, which is a very positive factor. The other is the discipline of post-supercycle mining companies, which have maintained these strategies and explain that there are profits and this payment of taxes, “said the executive director of Plusmining, Juan Carlos Guajardo.
Although the expert foresees that this trend will continue next year, he warned about possible risks, especially any unforeseen event that arises during the vaccination process at a global level, but also due to geopolitical risk and the relationship trade between China and the United States. “We have to see what Joe Biden will be able to do and if the relationship with China will change, this will be permanent, regardless of who is in the White House,” Guajardo warned.
Source: El Mercurio
Translated with Google Translator