The reasons that led copper to its highest price in history

This Friday, the metal reached US $ 4.70 a pound and an injection of money to the State is projected.

A mix of factors played a role, from the royalty bill approved in the Chamber of Deputies to the measures against unemployment in the United States.

A good de facto U res salad made the pound of copper reach the highest price in history this Friday, May 7, reaching US $ 4.70, according to data from the Chilean Copper Commission (Cochilco). The previous record occurred on February 14, 2011, with a price of US $ 4.603 a pound. Among the ingredients of the good news – for every extra penny of copper over the budgeted value, Chile receives US $ 20 million per year there is long and medium term. Others very contingent. External and internal. The peak price of this Friday confirms the rising curve that the red metal had been carrying for several months.

A more than contingent factor occurred this Friday in the United States, according to Marco Riveros, executive vice president of Cochilco.

“The United States reported a rise in the unemployment rate, which was 6.1%, compared to the 5.8% that was expected, which strengthened the downward trend of the dollar and pushed up the price of mining commodities”, Says the executive.

The decline in copper, which is traded in dollars, encourages its purchase at a global level, which raises the price.

Juan Carlos Guajardo, executive director of the special consultancy firm Plusmining, adds two other contingencies.

“A relevant factor was the approval by the Chamber of the mining Royalty project on Wednesday, since in the international market it is estimated that if the law is made as it is, it would leave a quarter of Chile’s mines out of the race and with it it would reduce the offer ”, says the executive.

Another cause is the drop in production in Chile and Peru, due to protection measures against Covid-19 ”, he adds.

Daniela Desormeaux, director of studies at the Vantaz Group consultancy, adds another contingency that concerns Peru.

“She also influences what Peru is experiencing, the second largest producer in the world, in that the polls give the majority to the candidate who aims to nationalize mining and who has more extreme ideas. There is a political factor that is weighing heavily, ”she explains.

Luis Alberto Reyes, an analyst at Mercados G, adds the problems Peru has had with Las Bambas, one of its most important mines.

“There have been road blockades and a conflict that are relevant considering the importance of copper in the neighboring country,” he explains.

The other causes are better known and have to do with China, the world’s largest copper importer, and the United States, the world’s largest economy.

“China is in the midst of a recovery plan for its economy after the Covid and for that it developed an infrastructure plan for large public works, with bridges, roads, public buildings, all works that demand a lot of copper, even more so considering the Chinese magnitudes”, Reyes points out.

“The United States, in turn, has a recovery plan ahead, which is in Congress. The strategy is the same, great works to generate employment,” adds Mercados G.

Renewable energy

In the medium term there is the decarbonization process through the adoption of renewable energies, which should displace oil, due to its high levels of CO2 emissions. Goldman Sach, one of the world’s largest banking and investment groups, struck the chair by stating that there would be no decarbonization without copper, which he called “the new oil.” Within decarbonization is electromobility, which also demands a lot of copper.

“Companies like Volkswagen, Volvo, among several others, declared that in a few more years they only manufactured electric vehicles, which demand a lot of copper,” explains Reyes.

“In the longer term, electromobility is a factor of demand and a basis for the price that will remain for a long time. We will see its greatest impact between 2025 and 2030 when it is something more massive,” confirms Desormeaux.

The Minister of Energy and Mining, Juan Carlos Jobet, shows the good passing of the red metal in numbers.

“The record rise in copper is very good news. If it is maintained, it will mean, with the royalty in force today, additional income for the State for almost US $ 10,000 million, which will help us to meet the urgent social needs resulting from the pandemic. The enormous contribution of the sector confirms that we need to have a serious discussion about the future of mining and its contribution to the country, protecting jobs and maintaining our world leadership ”, he indicates.

Source: LUN

Translated with Google Translator