Copper price gives relief to fiscal incomes, but experts see latent risks

The red metal is up 18% from its lowest level recorded in March, but insiders point to it being close to its ceiling. The Treasury is estimated to raise between $ 50 million and $ 60 million per extra penny of value.

Relief for the increasingly needy fiscal incomes is coming hand in hand with the rise in the price of copper, which has experienced an unexpected rebound. It is estimated that for every penny the pound raises, the country’s exports grow by about US $ 120 million, an amount of which, between US $ 50 million and US $ 60 million, goes directly to the Treasury for payment of taxes and income associated with state-owned Codelco.

The academic from the Catholic University Gustavo Lagos explains that this figure is changing, because it is related to Codelco’s production costs, as well as the tax brackets that are charged to mining companies. Yesterday the red metal was quoted at US $ 2.48 a pound, which represented an increase of 1.61% compared to Monday.

This rebound meant for copper to reach its highest value since March 13, accumulating an increase of 18% compared to its lowest price at the beginning of the crisis. The main reason for this variation has to do with the data of the economic recovery that China is showing, which at all costs seeks to overcome the crisis caused by the coronavirus, which coincides with a drop in the inventories of the Shanghai stock market. , the only one of the three main squares that has seen inventories decrease.

“The price is beyond what was expected, but although the risks are reduced day by day, they have not disappeared. It may happen that there is a significant correction in the value of the shares that carries the rest of the prices, so you have to be cautious,” warns the executive director of Plusmining, Juan Carlos Guajardo.

In this line, the director of Studies and Public Policies of Cochilco, Jorge Cantallopts, maintains that the magnitude of this appreciation “would be limited because he anticipates a significant drop in demand for copper during 2020 as a result of the pandemic in China and in developed economies.”

This is why experts agree that the price would be reaching its ceiling, in line with Cochilco’s projections, which estimated an average value of US $ 2.4 for this year, with a maximum price similar to that seen at the beginning of year, around US $ 2.7.

“You see specific rises, but there is no support for it to continue rising, it should stabilize at these levels. It is projected that by the end of the year there should be an inventory surplus, since demand was more restricted than supply, which leaves us uncertain as to how price should behave the rest of the year, “explains the partner of the Vantaz consultant, Mauro Mezzano.

Source: El Mercurio

Translated with Google Translator