(Reuters) - A rebound in the copper price is “essential” for Chile’s new government to finance its agenda, the mines minister said on Wednesday, after the metal fell to a nine-month low as investors braced for a trade war between China and the United States.
Minister Baldo Prokurica said the current prices would not fill the government’s coffers sufficiently to fund initiatives announced by new center-right president Sebastian Pinera such as a pension reform and a student loans fund, as well as servicing a growing public debt.
“For the government and for the policies being driven by the current administration, it is essential that the copper price returns above the $3 a pound mark, as was projected three months ago,” he told journalists on Wednesday.
Copper prices have dropped for eight consecutive days, and on Monday slid below the $3 a pound mark to a spot rate of $2.93 on Wednesday. Three-month copper on the London Metal Exchange fell to $6,423 a tonne, the lowest since late September.
Chile’s state copper commission Cochilco predicted prices would remain around $3.06 a pound this year, while the Andean nation’s central bank foresaw a level of $3.10.
Chile is the world’s largest copper producer, fulfilling 30 percent of global demand, and the metal can account for up to 15 percent of gross domestic product.
Prices of all raw materials have been depressed however by fears of a looming trade war between the world’s two largest economies.
Washington has said it would implement tariffs on $34 billion of Chinese imports on July 6, while a source told Reuters that Beijing was planning to respond on the same day and in kind.
Prokurica said Chile’s government expected the row to have a short-term impact. “China, the world’s largest consumer of base metals, continues to grow and the copper market continues to be undersupplied, so there are enough reasons for the price to remain high,” he said.
Reporting by Antonio de la Jara; Writing by Aislinn Laing; Editing by Chris Reese