The copper mining hub of Chile is grappling with a large second wave of coronavirus infections amid a national lockdown, yet the mining sector could be poised to push through the crisis largely unimpeded.
Chile implemented renewed border restrictions across major municipalities as the country approached 1 million confirmed cases of COVID-19, which it surpassed at the start of April. While Chile is ahead of most countries in vaccinating its public in pursuit of herd immunity, officials are fearful that the national health system could reach capacity due to the heightened viral spread.
Amid the health panic, the mining sector is likely to be one of the industries least affected by the lockdowns, S&P Global Ratings senior economist Elijah Oliveros-Rosen said in an interview. There may be some delays in transporting staff, but goods will be unimpeded by the restrictions.
"It will have some impact, but I think it's negligible compared to the rest of the economy," Oliveros-Rosen said.
Chile had the highest estimated tonnage of copper production in the world in 2020, totaling 5.7 million tonnes, estimated to decrease to 5.4 million tonnes in 2021, according to S&P Global Market Intelligence data. The country is home to some of the largest copper mines on the planet and a top copper miner, state-owned Codelco. The country was ranked second globally in 2019 for production of lithium, a prized battery metal, and hosts reserves of bulk commodities such as iron ore and coal.
Chile is expected to remove the lockdowns in May, the Ratings economist said. "Chile is one of the economies that was among the worst hit … but it is also one of the economies that is going to recover the quickest because it has a very strong mining sector with a positive outlook and because the vaccination progress means they're probably going to be among the first countries in Latin America to return to a new post-pandemic 'normal,'" Oliveros-Rosen said.
It is unclear whether any large mining companies in Chile saw a significant impact on production due to the pandemic. For its part, Codelco told investors in early March that social distancing measures and temporary production suspensions had no material impact on its 2020 output or cost-reduction targets.
The Chilean government has instructed the mining sector to introduce new safety measures to reduce the spread of the virus, including restrictions on special travel permits given to employees and contractors. Chilean Deputy Mining Minister Edgar Blanco told representatives of copper miners including Anglo American PLC, Antofagasta PLC and Teck Resources Ltd. that such travel permits should only be used in "strictly necessary" circumstances, S&P Global Platts reported April 5.
"They will only be allowed for people who carry out tasks necessary for the mines to continue operating," Blanco said.
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Antofagasta has had "no impact on operations or production" from the renewed lockdowns, a spokesperson told Market Intelligence. The U.K.-headquartered mining giant owns and operates some of the largest mines in Chile and has a majority stake in the massive Los Pelambres copper operation in the Coquimbo region.
"Antofagasta's planning for the year assumed that COVID-19 restrictions would remain in place for the entirety of 2021," the spokesperson said April 6.
On copper price, the dollar value per tonne has flattened on the news of the travel restrictions, after recent pullbacks. The price movement was indicative of expectations that there could be some delay in getting copper out of the country, but "the bottom line [is], it's negligible," Oliveros-Rosen said. "It's not something that's going to have a sustained impact on prices. It's not likely."
S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.