Santiago – Chile’s copper industry risks losing its competitiveness, as productivity declines to levels last seen in the early 1990s due to ageing mines and higher labour costs, miner Antofagasta has warned.
Chile, the world’s biggest copper producer, has invested roughly the same amount in its mining industry since 2004 as it did in the previous decade, yet there has barely been any growth in production, Diego Hernandez, chief executive of UK-listed Antofagasta, said in an interview at an industry gathering in the country’s capital.
Between 1990 and 2004 production grew 9.2 per cent annually while productivity almost doubled, he said. “Fifteen years ago Chile still had a competitive advantage in terms of labour as a component of our cash costs,” Mr Hernandez said, noting that labour at the time was cheaper than developed countries such as Australia, Canada and the US but less productive.
“Today we have similar salaries but we kept the same productivity we had before. Now we have a competitive disadvantage,” he said.
The fate of the copper industry is key for Chile, whose economy last year grew by the slowest pace in five years as demand weakened from its biggest customer, China. Chile alone produces about a third of the world’s copper, and in addition to Antofagasta, companies including BHP Billiton, Anglo American and Japan’s Sumitomo Corp all have operations in the country.
If increasing amounts of capital are needed to produce the same amount of output, that could hobble the industry’s ability to grow — especially as price declines shrink revenue.
Although the price of copper, used in wiring and electrical goods, has recovered from a January slump, it remains near five-year lows below $6,000 a tonne.
For the rest of this article, click here: http://www.ft.com/intl/cms/s/0/4ae8aaba-e267-11e4-aa1d-00144feab7de.html#axzz3XJLE53wg