(Bloomberg) --
The biggest copper-producing nation just offered further insight into why markets have been tightening of late.
Chile, which had managed to maintain production near pre-pandemic levels, reported copper shipments of $2.76 billion for August, an 11% drop from July, according to trade data released Monday by the country's central bank. That's the steepest decline since January.
While copper watchers are more focused on volume than revenue given that changes in the latter also reflect price moves, average copper futures in August were slightly higher than July. That indicates an even steeper drop in August production when the statistics agency discloses it later this month. Chile accounts for a quarter of global copper output.
To be sure, exports can also depend on shipping schedules and the August decline may prove to be a blip. But confirmation that the country's giant mines are struggling to maintain normal production levels because of virus-fighting measures may give more legs to a rally that's already taken prices to two-year highs.
Comex inventories have fallen for 17 straight days, the longest run of draw-downs in more than a year, while lower treatment and refining charges are a sign that miners are struggling to keep up with demand from smelters.
“The imbalance between the limited supply of overseas copper concentrate and healthy demand from China's refineries may continue in the second half as Covid-19 disrupts mining operations in South America,” Bloomberg Intelligence analyst Yi Zhu wrote last week.
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