Industry Trend Analysis - Codelco To Focus On Innovation - MAY 2015


BMI View: Chile will remain the world's largest copper producer, though output growth will slow due to copper price weakness and operational challenges. Codelco , Chile's largest copper miner, will increase operational efficiency through focusing on innovation and technology.

Chile will remain the world's top producer of mined copper to 2019 and will account for 31.1% of global production in 2015. Currently, Chile's copper sector is dominated by state-owned Codelco, which will remain the largest copper miner globally, as measured in output through to 2019. Other large global diversified miners, including Glencore Xstrata, Anglo American, BHP Billiton, and Rio Tinto, are active in Chile's copper space.

In our view, Chile's vast copper reserves and developed copper sector will ensure it remains the world's top producer, but rising costs will reduce the sector's competitiveness and slow output growth over the coming years. Chile's copper reserves are located in the north of the country, which poses significant operational challenges in terms of elevated electricity, labour and water costs. Furthermore, copper price weakness will further push down miners' profit margins.We forecast copper prices to average USD5,750/tonne over 2015, significantly lower than the USD6,830/tonne average in 2014.

Chile's Growth To Fall Behind
Select Countries - Copper Mine Production Growth y-o-y (%)

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