The electrification shift means growing demand for copper, the wiring metal, as the world tries to move away from fossil fuels, but Chile's big copper mines, the world's top producer, are struggling to ramp up production.
Chile's February copper production hit its lowest level in six years, the country's statistics office said Friday. A few hours later Codelco, Chile's national copper company, said output woes suffered in 2022 would get worse in 2023 as under-investment over the past few decades forced the company to dig into new areas of its ageing deposits.
In Chile, water shortages caused by a prolonged drought, a series of operational setbacks, project delays and lower grades of ore are plaguing local copper mines. That's good news for bulls in the copper market, but it means supply gaps are a growing concern because copper is a key material in the global energy transition, used in everything from electric cars to wind turbines.
Andre Codelco, chief executive, said: 'It was a complicated year in terms of production, costs and profitability,' Mr. Sogaray said. 'It was a challenge for us to find ways to improve our performance going forward.'
Codelco expects 2023 production could fall as much as 7 percent after a decline in 2022.
The world's largest copper company believes its wholly owned mines will produce between 1.35 million and 1.42 million tonnes in 2023.
Data released by Chile's statistics office showed the country's copper production fell 12 percent in February from January, the weakest monthly output since early 2017.
For the global copper market, the drop in Chilean production points to a further tightening of supply, with inventories on the London Metal Exchange close to their lowest level in 18 years. At the same time, Chinese demand is picking up.
Still, Sugaray thinks the market is fairly balanced right now, forecasting prices between $3.50 and $4.40 a pound, compared with just over $4 today.
Chile's state-owned producer produced 1.45 million tonnes of copper in 2022, down 11 per cent from a year earlier after unexpected events including falling rocks, equipment failures and frozen DAMS. Sugaray said Codelco is simultaneously developing several large projects in an effort to restore production by the end of the century. It's a tall order as the industry grapples with the logistical challenges laid bare by the pandemic.
