Despite copper trading at record-high prices, output continues to decline, and the gross value of exports could be reduced by between US$4.9 billion and US$5.4 billion.
Chile’s mining operations have been unable to fully capitalize on the record copper prices seen on the London Metal Exchange. According to the National Statistics Institute (INE), the Mining Production Index (IPMin) plunged 10.6% in June, marking the steepest decline of the ear. Lower mining and processing activity, based on figures from the Chilean Copper
Commission (Cochilco), implies an 8.8% drop compared with the same period in 2025.
So far in 2026, INE reports that Codelco has reduced its copper production by 64,000 tonnes, while the private sector has cut output by 134,000 tonnes. Cochilco, meanwhile, forecasts that total copper production will finish the year approximately 2% below 2025 levels.
But what explains this decline in production? According to industry experts, the downturn reflects a combination of cyclical and structural factors. The common denominator, they emphasize, is insufficient and delayed investment to sustain productive capacity.
A Weakened Foundation
According to Juan Carlos Guajardo, Executive Director of consultancy Plusmining, the current situation is the result of “accumulated vulnerabilities” built up over many years due to the postponement of sustaining capital projects, mine development, exploration, maintenance, and equipment replacement.
He notes that this was driven by a combination of regulatory and political uncertainty, the financial discipline adopted after the previous commodities supercycle, and, more recently, the effects of the COVID-19 pandemic. “On top of this already weakened base, the industry has also faced declining ore grades, operational problems, water constraints, equipment failures, maintenance shutdowns, and specific disruptions at major mining operations,” he adds.
Cumulative production through May totaled approximately 2 million tonnes—around 196,000 tonnes less than during the same period in 2025. Guajardo estimates that, “valued either at Cochilco’s projected average copper price or at current market prices, this production gap represents between US$2.4 billion and US$2.6 billion in potential gross export value during the first five months of the year alone.”
The executive notes, however, that the fiscal impact is more difficult to quantify because it depends on which companies experience production losses, their respective cost structures, their effective tax burdens, and the share attributable to Codelco. “As an order of magnitude, a loss of 400,000 tonnes at current copper prices could translate into between US$600 million and US$1.2 billion in lower government revenue from taxes, royalties, and Codelco contributions. This is not an official fiscal estimate, but it helps illustrate the scale of the problem,” he says.
He adds that these figures do not include the broader indirect effects on mining suppliers, employment, investment, transportation, and regional economic activity.
Greater Value per Tonne
According to Hernán de Solminihac, former Minister of Mining and Public Works and member of the Executive Committee of CLAPES UC, declining ore grades are a major driver of the current production downturn. He argues that this represents a highly significant structural challenge because it requires mining and processing substantially more material to produce the same amount of refined copper, thereby increasing costs for energy, water, consumables, and equipment. However, he emphasizes that “year-to-year production declines are also driven by operational factors and project execution. The challenge is not only to produce more copper, but to produce it more productively and at lower cost.”
That said, De Solminihac explains that the effects of declining ore grades can be mitigated through timely investment, innovation, automation, improved processes, and new mining projects. “The problem arises when the execution of these investments fails to keep pace with the natural deterioration of ore bodies,” he stresses.
Finally, the former minister emphasizes that the industry’s challenge should not be measured solely in terms of production volumes. Rather, the strategic objective should be to “improve productivity by reducing costs and strengthening competitiveness. This combination will increase mining companies’ profitability while also boosting the sector’s contribution to the State through taxes, royalties, and Codelco’s earnings.”
Too Early to Talk About a Turning Point
According to economist Daniela Desormeaux, partner at Signumbox Market Intelligence, although Chile’s overall production trend remains downward, performance varies considerably across mining companies.
“There are operations where improvements in processing and operational efficiency have partially offset these effects,” she says. Nevertheless, she adds that “it is still too early to speak of a change in trend,” while acknowledging that “these results may be signaling the beginning of a gradual stabilization at some mining operations.”
Desormeaux agrees with De Solminihac, noting that roughly two-thirds of this year’s production decline is attributable to geological factors, such as lower ore grades and increasing mineral complexity, while the remaining one-third reflects operational factors.
“Today, most mining investments are brownfield projects—that is, initiatives undertaken at existing operations—whose primary objective is to maintain production levels rather than increase them. (…) Therefore, more important than this year’s temporary production loss is Chile’s ability to recover and sustain its production levels over the coming years,” she explains.
EAmong the most urgent measures needed to reverse this trend, the economist argues that, in the short term, Chile must restore productive capacity at existing operations. Looking further ahead, she believes the priority should be to “reinvigorate mineral exploration. (…) Chile continues to possess outstanding geological potential, but that potential must be converted into new mining projects. This becomes even more important in the context of the favorable commodity price cycle we are currently experiencing.”
Lastly, Desormeaux stresses the need to move toward a more integrated mining industry by creating synergies among operations through shared infrastructure, including desalinationplants, water conveyance systems, transmission lines, ports, roads, and mineral processing facilities.
Impact on Exports
José Tomás Morel, Head of Research at the Mining Council (Consejo Minero), argues that rather than viewing the current situation as a temporary setback, “we should understand it as a warning sign.”
In this regard, he notes that Chile possesses a world-class pipeline of mining projects and remains a highly attractive destination for investment. The key challenge, he says, is “to create the conditions that allow these investments to materialize and translate into new production.”
Regarding the issue of declining ore grades highlighted by analysts, Morel explains that it reflects the natural evolution of a mature mining industry that has been exploiting world-class deposits for decades. Indeed, he points out that Chile is home to century-old operations such as Chuquicamata and El Teniente.
Although he acknowledges that there is no single figure to quantify the impact, “what we do know is that lower production reduces government revenue and diminishes the positive contribution that mining makes to economic activity and employment.”
Morel concludes that Chile must provide investors with greater certainty regarding the regulatory framework governing mining development while establishing a more efficient and predictable permitting system. In addition, he argues that it is essential to strengthen the competitiveness of the sectors that underpin mining production, particularly human capital, energy, and infrastructure.
Source: El Mercurio