Chile's government expects copper prices to remain high for some time and a sudden fall-off in demand is unlikely, the major exporter's mine minister told local radio on Friday. Santiago Gonzalez said the price outlook in the medium- to long-term scenario was also solid and backed by sustained demand in key markets other than the United States.
Copper prices have fallen off in recent weeks amid growing turmoil on US financial markets and the nervous reaction of global economies as traders foresee a slowdown in demand for commodities. "We don't think that copper demand in industrialised nations is going to fall precipitously from one day to the next," Gonzalez told Chile's Co-operative radio station.
"We have a lot of faith that the copper market will stabilise at current prices around $3 per pound. That is good business and good news for Chile," he said. Chile is the world's largest copper producer and the red metal is a pillar of the economy, which is one of the region's most robust.
Chile's top customers for copper - typically used in electrical wiring, plumbing, heating, air conditioning, roofing materials and car radiators - are China, South Korea, Japan, Italy and the United States.Gonzalez said Chile's diverse copper customer base helped shield it from economic turbulence in the United States, where the key housing market has been hit hard by a credit crunch. "It is true that it (the United States) is important, but it is not the most relevant consumer country for us. The most relevant countries for Chile are China, (South) Korea and Japan," Gonzalez said.
Experts who help craft Chile's federal budget were betting on average copper prices 10 years out of $1.99 per pound, based on studies of the world's economies. Gonzalez said state-run Codelco, the world's largest copper producer, was using a more conservative, 10-year outlook for around $1.70 per pound for the red metal. During the first half of 2008, it cost Codelco around $1.09 to produce a pound of copper cathode.
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