The Executive Director of Plusmining analyzes the current cycle of record copper prices and the risks facing mining investment, fiscal policy, and Chile’s long-term competitiveness.
By Valentina Pizarro
Copper prices have reached peaks above US$6/lb on the London Metal Exchange. Regarding price projections, the Chilean Copper Commission (Cochilco) has estimated an average of US$4.95/lb for 2026 and US$5.00/lb for the following year. Cochilco has also reported an investment portfolio of US$104.549 billion in mining projects within Chile for the 2025–2034 period, the highest level in more than a decade.
This context has fostered optimism and renewed interest in mining investment, but it also raises questions about the sustainability and direction of this high-price cycle. For Juan Carlos Guajardo, Executive Director of Plusmining and expert in mineral economics, the current scenario combines solid structural fundamentals—such as constrained supply and demand linked to electrification—with a growing influence from financial markets.
Guajardo warns of the risks of overreacting to exceptionally high prices, both in investment decisions and in fiscal policy and labor negotiations. In his view, “the challenge for Chile is not only to capitalize on copper’s favorable moment, but to do so with discipline, a long-term perspective, and a focus on productivity, ensuring that euphoria does not obscure structural issues that could undermine the industry’s future competitiveness.”
The Paradox of High Prices
Copper is experiencing very elevated price levels. In this context, how can one distinguish between justified valuation and a financial bubble dynamic?
The difference lies in how much of the price is driven by real fundamentals and how much by financial flows. Today, there are solid fundamentals shaped by structurally constrained supply, stricter environmental requirements, declining ore grades, and demand associated with electrification, grids, renewable energy, and defense.
However, copper has also deepened its role as a financial asset. During periods of U.S. dollar weakness or increased demand for real assets as a hedge, investment funds raise their exposure to metals, and copper has increasingly become one of their preferred choices. These flows can amplify price movements and generate episodes of heightened volatility.
We are not facing a purely speculative bubble, but rather a market in which the financial dimension magnifies the physical cycle. This requires interpreting price signals with caution.
How might the current high-price cycle affect mining investment decisions? What factors could influence decision-making?
High prices naturally improve investor sentiment. Projects that once appeared marginal begin to look attractive, and previously postponed discussions are revived.
However, mining investment decisions are not made based on the spot price of the day, but on long-term projections. What truly matters is confidence that the average price over the coming years will justify the risk and the capital committed.
Other factors also play a critical role, such as regulatory stability, permitting timelines, construction costs, availability of water and energy, and access to financing. In a more volatile environment, companies tend to be more selective and prioritize higher-quality projects or expansions of existing assets.
“The Temptation Is to Assume the New Level Is Here to Stay”
For producing countries such as Chile, how does this new financial dimension of copper affect the way fiscal policy should be designed?
When prices reach exceptionally high levels, the temptation is to assume that the new level is permanent. Experience shows that this is rarely the case. Fiscal policy should therefore be guided by prudence and a long-term perspective. A significant portion of extraordinary revenues should be saved or used to reduce debt, rather than committing permanent expenditures based on temporary income.
Chile’s institutional strength has historically rested on countercyclical fiscal management. In a market where copper is also influenced by financial factors, volatility may be greater. This makes discipline even more important.
With record prices, what happens to project execution? Can timelines be modified? Are there potential negative effects?
High prices generate pressure to accelerate decisions and, in some cases, to shorten execution timelines. However, mining is a long-cycle activity with high technical complexity. It is neither easy nor always advisable to force timelines.
When many companies invest simultaneously, bottlenecks can emerge in engineering, construction, equipment, and skilled labor. This can result in cost overruns, delays, or reduced efficiency.
There is also the risk that projects planned under exceptionally high price assumptions may face difficulties if the cycle corrects before operations begin. For this reason, disciplined planning is essential, even during periods of euphoria.
Toward Reasonable Negotiations
Do you foresee risks in the labor and union sphere? More than thirty collective bargaining processes are expected in mining this year.
In record-price cycles, it is natural for wage expectations to rise. Visible profits increase pressure for higher benefits.
The risk lies in structuring permanent costs on the basis of prices that may be temporary. If labor agreements assume that current price levels are structural, the industry may be left with a less flexible cost structure in the event of a correction.
A reasonable approach would be for negotiations to acknowledge the favorable moment while incorporating mechanisms that link a significant portion of compensation to results and performance.
It has been said that Chile’s production has stagnated for decades and that productivity challenges persist. Could high copper prices cause these issues to be overlooked?
Yes, that is one of the greatest risks. High prices can mask inefficiencies, as wide margins allow higher costs to be absorbed without the problem becoming immediately apparent.
Chile faces significant structural challenges, including deeper deposits, lower ore grades, stricter environmental requirements, and greater permitting complexity. If the positive cycle leads to postponing improvements in productivity, innovation, or management, the country may lose competitiveness in the medium term.
Favorable cycles should be used precisely to address these challenges, not to ignore them.
What investment guidance would you suggest for the mining sector during this cycle? Technology, workforce, or something else?
Rather than expanding expenditure by inertia, this is a moment to invest strategically. The priority should be to enhance productivity and resilience.
This entails accelerating the adoption of technology, automation, and data analytics to optimize processes, improve energy efficiency, and reduce operating costs. It also involves strengthening capabilities in underground mining, processing, and water management—areas that will shape a significant portion of the country’s productive future.
The current high cycle offers an opportunity to strengthen the industry’s structural foundations. If it is used solely to capture short-term rents, that window of opportunity will be wasted.
Source: El Dínamo