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Copper market trends

Jorge Cantallopts

Director of Research and Public Policies

Chilean Copper Comission (Cochilco)

December 2017

Fuente: Cochilco

2017 COPPER MARKET ANALYSIS

2018 FORECAST

MEDIUM-SCALE COPPER MINING IN CHILE

Contents

2017 COPPER MARKETANALYSIS

Shanghai

London

2017 copper price evolution

Source: Cochilco’s elaboration on the basis of London Metal Exchange, Comex and Shanghai Stock Exchange.

450

500

550

600

650

700

750

800

2,4

2,6

2,8

3

3,2

Q1 Q2 Q3 Q4

Sto

cks

(in

th

ou

san

do

f to

n.)

Spo

t P

rice

i(U

S$/l

b)

Stocks (in thousands of ton.) Spot Price Moving Average 30

(1) Managed Money Trader (MMT) is the net number of copper futures. It’s evolution in time implicitly reflects the investors’ expectation aboutthe copper price.

Source: Cochilco’s elaboration on the basis of CFTC, Comex.

Investment 2016 2017

Copper 18.4 17.9

S&P 500 9.5 17.4

Dow Jones 20.9 21.4

TW USDollar Index

4.2 -7.1

Market return (%)

20

40

60

80

100

120

2,2

2,4

2,6

2,8

3,0

3,2

Q1 Q2 Q3 Q4

Co

ntr

acts

(in

th

ou

san

ds)

Spo

t P

rice

(U

S$/l

b)

Spot Price MMT (Contracts)

Source: Reuters

2017 Investment activity: Managed Money Trader (1) and Copper price

Source: Cochilco’s elaboration on the basis of Reuters.

0

100

200

300

400

500

600

700

800

900

Q1 Q2 Q3 Q4

Stocks in Stock Eschanges (in thousands of ton.)

LME COMEX SHFE

428

717

265

511

543

552

1235

1118

1121

961

1291

1304

2012

2013

2014

2015

2016

2017

Stocks in and out of Stock Exchanges(in thousands of ton.)

In Out

2017 warehouse stocks in and out of Stock Exchanges

Source: Cochilco’s elaboration on the basis of London Metal Exchange and St. Louis Fed

116

120

124

128

2,3

2,5

2,7

2,9

3,1

3,3

Q1 Q2 Q3 Q4

US

Do

lalr

Ind

ex

Spo

t P

rice

(U

S$/l

b)

Trade Weighted US Dollar Index Spot Price

Trade Weighted US Dollar Index vs Copper Price

In December 12-13, it’s anticipated that the Federal Reserve will rise its interest rate.

Source: Cochilco’s elaboration on the basis of Reuters and World Metal Statistics.

Quarterly GDP evolution of the world’s biggest consumers

0,8

1,2

3,5

2,1

1,2

3,13,3

Q1

-16

Q2

-16

Q3

-16

Q4

-16

Q1

-17

Q2

-17

Q3

-17

UNITED STATES

1,7 1,7 1,7

1,9

2,0

2,4

2,6

Q1-

16

Q2-

16

Q3-

16

Q4-

16

Q1-

17

Q2-

17

Q3-

17

EUROZONE

6,7 6,7 6,7

6,8

6,9 6,9

6,8

Q1-

16

Q2-

16

Q3-

16

Q4-

16

Q1-

17

Q2-

17

Q3-

17

CHINA (%)

Variation (%) in relation to the same month in the previous year:

In 2016 China accounted for 50% of the world’s refined copper consumption, the Eurozone, 12%, and theUnited States, 8%.

Source: Cochilco’s elaboration on the basis of Reuters.

Monthly Industrial Production evolution of the world’s biggest consumers

-1,3-1,2

-0,8

-0,4

0,8

0,0

0,4

1,5

2,22,22,12,2

1,5

2,1

2,9

ago

-16

oct

-16

dic

-16

feb

-17

abr-

17

jun

-17

ago

-17

oct

-17

United States

2,5

1,0

3,0

1,8

0,2

1,2

2,1

1,2

4,1

3,2

3,8

ago

-16

oct

-16

dic

-16

feb

-17

abr-

17

jun

-17

ago

-17

Eurozone

6,3

6,16,16,2

6,06,1

6,6

7,6

6,56,5

7,6

6,4

6,0

6,6

6,2

ago

-16

oct

-16

dic

-16

feb

-17

abr-

17

jun

-17

ago

-17

oct

-17

China

Variation (%) in relation to the same month in the previous year:

2018 Forecast

2016-2018 Mine copper production

Country2016 2017 f 2018 f

Thousand MT Thousand MT Var. % Thousand MT Var. %

Chile 5,553 5,327 -4.1% 5,740 7.8%

Peru 2,354 2,455 4.3% 2,504 2.0%

China 1,851 1,906 3.0% 1,963 3.0%

USA 1,431 1,345 -6.0% 1,385 3.0%

DR Congo 987 1,071 8.5% 1,049 -2.0%

Kazakhztan 509 540 6.0% 593 10.0%

Australia 948 948 0.0% 1,010 6.5%

Zambia 738 801 8.5% 841 5.0%

Russia 766 766 0.0% 797 4.0%

Canada 740 747 1.0% 774 3.5%

Mexico 708 637 -10.0% 656 3.0%

Indonesia 696 661 -5.0% 697 5.5%

Poland 425 425 0.0% 423 -0.5%

Mongolia 329 340 3.5% 337 -1.0%

Brazil 353 310 -12.0% 312 0.5%

Iran 278 274 -1.5% 281 2.5%

Rest of the World 1,627 1,570 -3.5% 1,625 3.5%

World 20,291 20,124 -0.8% 20,988 4.3%

Source: Cochilco’s elaboration on the basis of World Metal Statistics and SNL.

China’s GDP growth is expected toslow down from 6.8% (2017) to 6.5%(2018), which will translate into alower copper demand growth from2.2% (2017) to 2% (2018). In terms ofvolume, the increase will be from 11.9million ton. (2017) to 12.1 million(2018).

In the Eurozone, Japan and the USA,copper demand is expected to remainrelatively stable.

Source: IMF.

1,51,8

6,7

1

3,2

2,2 2,1

6,8

1,5

3,6

2,31,9

6,5

0,7

3,7

USA Eurozone China Japan World

2016 2017f 2018 f

GDP growth forecast among the world’s main copper consumers

Source: Cochilco.

2016-2018 refined copper demand

Country2016 2017 f 2018 f

Thousand MT Thousand MT Var. % Thousand MT Var. %

China 11,642 11,898 2.2 12,136 2.0

Europe 3,781 3,784 0.1 3,822 1.0

United States 1,811 1,815 0.2 1,833 1.0

Japan 973 987 1.4 997 1.0

South Korea 759 770 1.4 772 0.3

India 499 512 2.6 542 5.9

Turkey 464 471 1.5 481 2.1

Taiwan 507 510 0.6 512 0.4

Brazil 511 519 1.6 529 1.9

Russia 371 369 -0.5 373 1.1

Rest of the world 2,105 2,147 2.0 2,201 2.5

World 23,423 23,782 1.3% 24,198 1.4%

In thousands of MT.

Source: Cochilco.

2016-2018 refined copper balance

2016 Var. % 2017f Var. % 2018f Var. %

Mine copper production 20,291 4.5 20,124 -0.8 20,988 4.3

Refined supply 23,570 2.1 23,622 902.2 24,110 2.1

Primary 20,070 4.4 19,597 876.4 20,460 4.4

Secondary 3,500 -9.7 4,025 15.0 3,650 -9.3

Refined demand 23,423 2.3 23,782 1.5 24,198 1.7

China 11,642 2.5 11,898 2.2 12,136 2.0

Rest of the world 11,780 0.3 11,884 0.9 12,061 1.5

Refined balance 147 -160 -88

Copper Price average) 221 -11.5 279 26.2 295 5.7

Source: Cochilco.

2018-2019 Copper Price forecast

221

279

295

200

220

240

260

280

300

320

Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct

Spot Price (cUS$/lb) Yearly Average Forecast

2016 2017 2018 F

Medium-scalecopper mining in Chile

Source: Cochilco’s elaboration on the basis of Sernageomin.

Small medium-scaleminers

Large Medium-scaleminers

Number of companies 11 13

Refined copper equivalent productioncapacity (thousand ton./year)

1.2– 10 12-50

Number of workers 80-200 200-400

Yearly sales (in million US$) 8-50 60-300

2016 production (in thousands of ton.) 45 358

There are two categories clearly differentiated:

Medium-scale copper mining in Chile

Source: Medium-Scale mining companies Survey, 2016, Cochilco.

Medium-scale copper mining’s main production inputs in 2014

Contractor Services40,8%

Water1,1%

Reactives, explosives, others

11,2%

Fuels3,6%

Labour21,6%

Sulfuric acid6%

Fuels3,6%

Worth of Supplies: US$

1.013 millions

Project Operator Region Developing stageProjected

starting yearInversión (MMUS$)

Playa Verde Copper Bay Atacama Feasibility 2018 95

ProductoraSoc. Minera El Águila

Ltda.Atacama Pre-Feasibility. 2020 725

Diego de AlmagroCía. Min. Sierra Norte

S.AAtacama Feasibility 2020 597

El Espino Pucobre Coquimbo Feasibility 2022 624

2,041

Medium-scale copper mining project portfolio

Source: Cochilco.

Logo Gobierno:

160x162px.

Ministerio,

Subsecretaría,

Organismo,

etc.:160x145px

Copper market trends

Jorge Cantallopts

Director of Research and Public Policies

Chilean Copper Comission (Cochilco)

December 2017