Earthquake in Chile May Affect Copper Price

The human and social costs of the earthquake in Chile have been well reported. Now we can look at the possible far-reaching effects to the country’s business and transportation infrastructure. They may reach closer to home than some have anticipated. Chile is the largest exporter of copper in the world, so the most immediate effect is an increase in the cost of anything that uses copper. That, of course, includes HVAC equipment.

Billy Jobe, district manager for Comfort Supply Inc., said his company will be warning contractors about price increases resulting from copper shortages. “Manufacturers will already have purchased all the copper they need for the year,” said Jobe. “But next year, we can expect to see some increased costs due to the earthquake’s effect on the copper mines in Chile.”

Many of the mining companies in northern Chile are Canadian. According to reports from the Canadian Broadcasting Corporation (CBC) News, Canadian mining companies with operations in Chile reported no damage to their operations from the earthquake, which struck in the South, but some had disrupted transportation links, which could make it difficult to get supplies.

The price of copper was sharply higher immediately following the 8.8-magnatude earthquake. In New York, copper for May delivery closed up 6.45 cents U.S., or 2 percent, to $3.33 a pound after rising as high as $3.48 a pound. Copper prices rose 3.7 percent on the London Metal Exchange, in the days following the earthquake.

“We have already received some notices from our suppliers letting us know that the copper shortage is going to mean higher prices,” said Jobe. He offered the following advice for contractors’ customers: “If you have been putting off replacing an HVAC unit, I wouldn’t wait until next year.

“When you’re watching the news, Chile might seem like it’s too far away to have any effect on us,” he continued. “But in a global economy, a few days of lost production will have consequences that can take months to fully realize.”

Publication date: 04/05/2010

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