11% of Chile’s GDP and 10% of Peru’s GDP are related to the extraction of mineral metal; among all these metals, copper is known as the crucial one in these two countries. As a consequence, copper accounts an important metal for the countries’ economies.
In view of the increase in the global copper price in 2021, Chile’s concentrate and cathode experienced an increase in their export price which respectively was 33.9% and 34%, and this increase was about 35% and 32.6% for Peru’s concentrate and cathode.
Chile and Peru are known as the largest mine copper producers owing to the existence of huge copper mines in them. Minera Escondida in Chile and mines of Cerro Verde and Antamina in Peru can be pointed out as the most essential mines and their share cumulatively is estimated at around 11.8% of the global copper. The majority of these 3 mines’ extracted copper is processed as concentrate and cathode then supplied. According to the global price of copper, cathode is priced; while the pricing of concentrate is based on its copper content in addition to the global copper price.
Overall, copper owns a great place in these two countries’ economies; therefore, factors like mines’ annual production volume, changes in the global copper price, and copper trade become so important for these countries. The share of mineral metal extraction in Chile and Peru’s GDP is about 11% and 10% respectively which caused that copper to be an important metal for the countries.
Price growth of concentrate and cathode after COVID-19 end
The price trend of concentrate and cathode was fluctuated over this period of time. From 2012 to 2016, export price of concentrate and cathode went through a downtrend and reached amounts of US$4,775/t and US$4,873/t respectively. The export price increased for these products since 2017 and it achieved to US$9,571/t and US$9,340/t at the end of the period.
Changes in export price of concentrate and cathode in Chile and Peru is affected notably by the global price of copper. In 2012-16, as a consequence of the global copper price drop, the export price of these products decreased. With the outbreak of COVID-19 in 2018 and the beginning of its restrictions, the global price of copper has further decreased; however, after the end of this epidemic and market recovery in 2021, the global copper price trigged a surge rapidly. Besides, the price of concentrate and cathode increased by 35% and 32.6% respectively compared to 2020.
The export premium of concentrate and cathode for each tonne of copper content in 2012-21 is indicated in chart 1. As can be seen in the chart, Peru’s concentrate and cathode show a positive digit in most years of this decade. On average, Peru’s concentrate premium was US$286/t and the cathode premium was US$58/t over this course. Also, concentrate premium increased by 86% in 2021 compared to 2020 and reached an amount of US$257/t, while the cathode premium decreased by 327% this year and achieved from US$111/t to US$26/t.
Notable gold and silver reserves in Peru
Chart 2 is drawn based on the export premium of copper concentrate and cathode of Chile over the last 10 years. The average premium of concentrate was US$-444/t and for cathode was US$-79/t. It’s nice to say that in 2021, concentrate premium decreased by 30% compared to 2020 and reached an amount of US$-676/t; also, with a 20% drop in 2021, cathode premium reached an amount of US$238/t. with the help of comparison between two charts of 1 and 2, it can be concluded that Chile’s premium for these products was lower than Peru’s premium over this period of time.
Normally, the unit value of the cathode is determined by taking into account a value-added to the concentrate; as a result, generally, the efficiency of the cathode is higher than that of the concentrate, and the cathode is sold at a higher price in the market. Anyway, with making a comparison between charts 1 and 2, it can be said that Peru’s concentrate premium is greater than cathode; while this matter is different from Chile’s premium. One of the main reasons of it which can be pointed out is the existence of a large volume of precious metals like gold and silver in Peru’s concentrate compared to Chile’s concentrate. It’s worth mentioning that in addition to copper reserves, Peru owns many large reserves of precious metals particularly gold and silver which a significant part of these precious metals obtains from the country’s copper mines.
On USGS investigations, Peru’s share in the global production of silver was 12.5% in 2021 and Chile’s share was 6.6%. Also, Peru’s share in the global production of gold has been estimated at about 3% this year and is known as a rich country in the field of gold reserves. Therefore, it can be concluded that the difference in the unit value of Peru and Chile’s concentrate has been created by this factor.
At the beginning of this period, concentrate unit value was about US$7,439/t and this unit value was US$7,828/t for cathode. The unit value of concentrate and cathode reached US$8,638/t and US$9,076/t respectively in 2021 which concentrate unit value increased by 33.9% and cathode unit value experienced an increase of 34% compared to 2020.
Chile and Peru’s shares in the concentrate export market were 7.2% and 3.7% in 2021. It should be said that these two countries are known as the largest copper concentrate exporters in the world. In addition, the shares of Chile and Peru in the Cathode export were 25.8% and 2.8% this year. Owing to the fact that the global copper price affect directly on concentrate and cathode price and also, copper products own a large share of these two countries’ GDP, it can be concluded that the countries’ economy can be influenced by the changes in the global copper price.