The spot price closed 1.63% higher at US $ 3.75552 a pound on the London Metal Exchange. With this, the price of the dollar in Chile closed with a fall of $ 8.48, making the Chilean peso the currency that appreciated the most on the day.
The price of copper extended its bullish streak, and registered its highest level in more than 8 years, driven by expectations of a faster-than-expected recovery of the world economy, given the massive vaccination processes against the coronavirus, and prospects of a deepening of the weakness of the dollar globally.
The spot price closed 1.63% higher at US $ 3.75552 a pound on the London Metal Exchange.
With this, it completed six consecutive days of increases and reached its highest value since October 5, 2012.
Meanwhile, three-month futures for the metal were up 1.8% at US3.78870 a pound.
Higher tax revenue
The positive performance of copper, the country’s main export, could continue to help alleviate the tax burden given its importance for state revenues.
Regarding the biminister of Energy and Mining, Juan Carlos Jobet, highlighted that “in recent days we have seen record copper prices, over US $ 3.75 per pound, values that we had not seen since the end of 2012”.
Jobet stated that “this is good news for Chile for two reasons: the first, because it will increase tax collection, which will allow financing the operation of the State and continue to help the most vulnerable families and the second, because as long as high prices are sustained, it will promote the development of new mining projects that will generate growth, jobs and thus help the economic recovery ”.
At the beginning of this week, the Budget Office (Dipres), raised its estimate for the increase in the effective income of the Total Central Government this year to 19.3% in real terms, a figure 4.2% higher than previously contemplated, due in part to an improvement in the outlook for the metal price.
Prices would continue to rise
The diagnosis is supported by analysts who see room for further increases.
Juan Carlos Guajardo, Executive Director of Plusmining, stated that “the conditions of strength in the copper market are quite consolidated in this and next year, so the upward trend would remain firm in this period, in which the price it should exceed US $ 4 per pound ”.
Meanwhile, Daniela Desormeaux, director of studies at Vantaz Group affirmed that “there are many analysts who expect the recovery of commodities to be in V by 2021 and there are different factors that explain it.”
She specified that “one of them has to do with the recovery and the boost that the Chinese economy has had and, on the other hand, the fiscal stimulus plans in the United States. So this points to a faster recovery and therefore higher demand for commodities ”.
Regarding whether or not we are in a new super cycle, she indicated that “we do not have the antecedents or the conditions for a super cycle, but the prospects for the medium and long term are positive for copper.”
Chinese New Year
Copper’s bullish streak comes on the eve of the start of the Lunar New Year holiday in China, the world’s leading copper consumer. But data on producer prices in the Asian nation, which showed that they rose 0.3%, marking their first increase in a year, anticipates that the impact would not be so relevant.
The rise in producer prices is also a sign that declining demand for copper due to the Lunar New Year in China could be less severe this year, as fewer workers suspend their work due to travel restrictions due to Covid -19, said Xiao Fu, director of commodity research at BOCI Global Commodities, in remarks to the Bloomberg agency.
“There is overwhelming optimism towards commodities this year,” he emphasized.
In this sense, he argued that “with the relaxation of central bank policy, there is a lot of money in the system and raw materials seem to be seen as a safe place for investors to deposit their cash.”
This scenario, in turn, would help to consolidate the downward trend of the dollar globally, since it would cease to have a leading role as a safe haven for investors.
“In this case, the look of copper is not only related to growth in China, but also seen as a reserve of value in the face of the loss of value of the dollar, said Arturo Frei, general manager of the Renta 4 brokerage.
A weaker dollar, moreover, tends to boost the prices of raw materials traded in that currency, since it lowers their cost by making demand more attractive.
In Chile, with the rise in copper, yesterday the dollar experienced its biggest fall in three weeks against the Chilean peso. The US currency reached a selling point of $ 726.42, which represents a decline of $ 8.48 in relation to the previous day and its lowest level since last January 21.
According to Bloomberg data, with this decline in the US currency, the Chilean peso is the currency that appreciated the most in the world during the day.
Translated with Google Translator