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Chile looking to boost copper smelting and refining capacity
The proportion of Chile's copper production in concentrates is projected to rise from around 50% at present to 70% by 2030, while output of cathodes would fall to 11% of the total, with only 19% in refined and smelted metal, similar to the current figure, according to figures calculated by state copper commission Cochilco.
This means that Chile's capacity to add value to its output and supply amid growing global demand for the metal will decline, limiting the country's control over the carbon footprint generated by the product once it is exported, an important factor given that the market is increasingly demanding greener copper.
As a result, the mining ministry has sent a strategy document to congress aimed at encouraging investment, innovation and technological progress to boost domestic refining and smelting (S&R) capacity, both in new units and at the facilities already operating in the country.
The document, prepared by Cochilco and officials from the mining, economy and environment ministries, is intended to ensure that new S&R plants are clean, environmentally sustainable and economically profitable (the strategy document, in Spanish, can be seen here and in the Documents box in the upper right corner).
The strategy has been prepared following a mandate received by the mining ministry portfolio through law 21,546 that enabled the closure of the Ventanas smelter despite it being considered essential to create conditions to increase domestic refining and smelting capacity.
Antofagasta and Tarapacá regions would be the main areas for the implementation of additional S&R capacity, considering that much of the country's copper production is located in the north of the country.
In 2020, more than 50% of Chilean copper concentrate was processed in foreign smelters, which produces a level of dependency that "leaves little room for action," the strategy document states.
"Excessive dependence on the export of mineral concentrates can expose the mining industry to the volatility of international prices," says Javier Jara, former deputy director of geology and mining service Sernageomin and current managing partner of Estribor Consulting.
"On the other hand, boosting smelting capacity in Chile can diversify the economy by allowing the production and export of products with higher added value," he tells BNamericas.
Global demand for refined copper is forecast to reach 25.7Mt this year, up 2.2% from 2022, with China set to require 14.4Mt and the rest of the world 11.3Mt. Meanwhile, total world supply of the metal is expected to be just under 25.7Mt, according to Cochilco's figures. Chile is still the leading global producer of the red metal, with annual copper production of around 5.6Mt.
The tight margins in supply of the red metal therefore mean that there is an opportunity for investment in greater S&R capacity in Chile.
The strategy document sent to congress also states that the development of new projects will be coordinated by the economy ministry and investment promotion agency InvestChile, and could involve the participation of the State, "either by participating in one or more projects in the near future or by creating the conditions to enable private companies, national or foreign, to be interested in carrying out this type of project in the country under a public-private collaboration scheme."
Smelting and refining facilities in Chile
Source: Prepared by BNamericas, based on the strategy document.
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