Conflict in Ukraine boosts copper price

The war in Ukraine has pushed copper prices higher in the last two weeks. Last Monday, March 7, the red metal closed with a new high of US$10,730 a tonne, on the London Metal Exchange (LME), as a result of the uncertainty regarding its provision. The malleable price has increased by 55% since April 3, 2020.

Peru is the second copper producer in the world. In 2021, exports amounted to 2,332 tons, with a value of US$ 20,698 million; according to the Mining Statistics Bulletin (BEM) of the Ministry of Energy and Mines (Minem). Arturo García, professor at ESAN, recalled that the mineral represents 32.8% of total sales abroad.

Chance

This bonanza must be taken advantage of, in the opinion of Rómulo Mucho, former deputy minister of Mines, since “it will bring greater fiscal income as long as the mines maintain their production.”

In 2021, Income Tax collection increased 43.8% and 24.7%, compared to 2020 and 2019, respectively. However, Much anticipated that, “beyond the war, copper will continue to be used in the coming months and years for the transition to renewable energies and electromobility.”

Indeed, Jeff Currie, a Goldman Sachs commodity researcher, warned that copper “would go as high as $15,000 in the short term.”

Macroconsult specified that the recent rise “will help cushion the negative impact of the sharp rise in other raw materials of which we are net importers, such as oil.”

Investments

César Romero, head of research at Renta 4 SAB, warned that the sustained increase in the price of copper will be decisive in generating investments. “In the end, it marks the moment in which the price of the commodity is found, and that means that companies can generate greater investments, as long as it is something that can be maintained in the short term. We don’t see commodity prices going down,” he said.

For his part, Rómulo Mucho calculated that the continuation of the high prices could generate an increase of US$ 3,500 to US$ 4,000 million in income from copper exports in 2022, especially with the start of operations of Quellaveco, Minajusta and Toromocho. .

Currency rallies take off in Latin America

Latin American currencies are the best performers this year after a disastrous 2021: Brazil, Peru and Colombia lead the top best appreciated local currencies with 8.92%, 7.37% and 6.04%, according to Bloomberg.

Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. expect more gains ahead as correlations with commodity prices such as oil, soybeans, iron ore and copper tighten.

Nonetheless, Mexico’s weight has decreased this year, making it an outlier. Last week it lost 2.9%; Despite being a major oil producer, exports are declining and are expected to stop in 2023.