COMEX copper futures turned negative after the U.S. jobs report in New York on Friday and posted a sixth straight session of losses.
Worries about global growth, inflation and interest rates, as well as Europe's energy crisis, have weighed on copper prices for months. Copper prices have now fallen by a third since hitting an all-time high of $5 a pound in early March.
The fundamentals are lacklustre
Amid economic gloom and the prospect of a recession, a recent blockbuster announcement by the world's largest copper producer appears to have gone largely unnoticed by massive speculators in the futures market. Speculators have been net short copper for the past seven weeks.
Codelco, Chile's state copper company, said it expected to produce 1.49 million to 1.51 million tonnes this year, down from its previous forecast of 1.61 million tonnes.
Codelco Chairman Maximo Pacheco said the 2023 production forecast was 1.45 million tonnes, but importantly, there was no improvement in the outlook.
"For the five years 2023-2027, our best forecast is an average of 1.5 million tonnes.
"Structural projects [to maintain output levels] are actually behind schedule and over budget."
Codelco Copper Production growth stagnation (Production composition by mine)
The "best forecast" will record its lowest production in at least a decade, compared with an average attributable production of 1.74 million tonnes since 2010, the data showed.
Codelco's output next year will be more than 400,000 tonnes below its 2015 peak, making the mine the fifth-largest in the world based on 2021 production schedules.
Two lost decades
Codelco's woes are Chile's: water shortages, declining grades, depletion rates, a paucity of projects to invest in, strike action, tax increases, regulatory uncertainty and a widening capital expenditure budget.
Chile produced 21 million tons of primary copper in 2021, a quarter of the global total, according to the U.S. Geological Survey. On a pro rata basis, Chile's position in global copper production is comparable not only to Saudi Arabia's in the crude oil market, but also to the total output of the 13 Opec members.
Chilean production is back at 2004 levels
BMO Capital Markets said in a recent report that Chile was heading for a "lost two decades" in terms of copper production growth: "After steady growth in the 1990s and early 2000s, production levels stagnated and forecasts of production exceeding 6m tonnes never materialised. This is not for lack of investment, with many large new mines entering the market during this period. Rather, it is the result of a decline in existing assets."
In particular, BMO noted that Chilean copper production "continues its inevitable downward trend".
