CEIC Macro Watch Global #31 - April 30, 2014 - Chile is the world's top producer of copper. According to the US Geological Survey, Chile accounted for 31.84% of all copper mined worldwide in 2013. The abundant copper reserves have naturally led to the growth of mining, making it one of the largest industries in Chile. In 2013, copper exports accounted for more than half of the total goods exported (52.36%). However, the copper industry has also declined in significance to the economy in terms of gross value added and exports earnings in recent years.
The gross value added of the copper industry has declined sharply since 2010. As of 2013, the copper industry amounted to 9.76% of Chile’s total GDP, down from 11.39% in 2012, and was previously an even higher share of 13.27% of GDP in 2011. One possible factor to explain copper’s declining contribution to GDP is falling copper prices, which have been on a downward trend since a high of USD 4.48/lb in February 2011, falling to USD 3.27/lb in December 2013. Even though copper production rose by 6.09% in 2013 to 5.78 million metric tons, this was overshadowed by the corresponding decline in copper prices.
Increased competition in the international copper market is another factor. While Chile is the world’s largest producer of copper, China, the second largest, produced 9.22% of world production in 2013. China’s copper production is comparatively small, but it has been a growing industry since 2009 when its share of world production was 6.73%. China’s emergence in the copper industry has probably eroded some of Chile’s market share, decreasing the latter’s copper transactions and revenues. As such, copper exports fell to USD 40.16 billion in 2013 from USD 44.67 billion in 2011 though this may also be attributable to the aforementioned fall in copper prices.
China’s recent emergence as an important player in the world’s copper production poses some serious threats to Chile. However, Chile has a natural advantage in terms of its substantial copper reserves, which will enable it to dominate the market in the long run. As of 2013, Chile has the largest amount of copper reserves at 190 million metric tons, significantly larger than China’s copper reserves of 30 million metric tons.