During the first quarter of the year, Peru and Chile share a similar performance when it comes to the exploitation of the red metal, while Colombia is affected by lower prices for nickel and thermal coal.
Mining, one of the main engines of economic growth for the Pacific Alliance country, has experienced notable developments in recent months. For example, Peru, Latin America's top gold producer and the second of silver worldwide, registered GDP growth of 1.4% in the first quarter of 2024, largely owing to mining exports, according to a study by the National Institute of Statistics (INEI).
Obviously, these broad numbers do not tell the full scenario. To begin with, the year started on the right foot with shipments of all metals increasing in January, with the exception of lead, zinc and molybdenum. In this context, the National Society of Mining, Petroleum and Energy of Peru (SNMPE) says that exports totaled US$ 3.10 billion and grew by 15% compared to January 2023. These shipments accounted for 58% of total Peruvian exports in the first month of 2024.
LOWER SHIPPING IN PERU AND CHILE
The largest contributor to mining export revenue was copper, accumulating US$1.44 billion in exports, 6.6% more year-on-year. The increase is explained by a 3.4% rise in volume and 3% in prices. The SNMPE stated that copper accounted for 46% of total mining export revenue, followed by gold with 35%, and iron (6%).
For their part, February figures followed a similar trend: mining exports reached US$3.22 billion, reflecting a year-on-year increase of 13.2%. This outcome was boosted by a 16.9% increase in copper shipments, which reached US$ 1.65 billion. Incidentally, although the exported volume of the red metal increased by 29.4% compared to February 2023, prices decreased by 9.6%.
On the other hand, gold faced a more conventional outcome: its exports reached US$ 998 million, a 33.9% increase. Something predictable if we take into account that the volume grew by 22.5% and the price by 9.3% compared to 2023.
Generally speaking, the Peruvian economy's dependence on its emblematic sector grew: 62% of total exports were mining products. However, in March, although the world price of copper exceeded US$10,000 per ton, this did not reflect in shipments of the metal in Peru. Extraction activities obtained 219,011 fine metric tons (FMT), 0.1% lower than the 219,302 FMT in the same month in 2023, according to the Ministry of Energy and Mines of Peru (Minem). Previously, copper exploitation had experienced a notable growth of 12.7% in February and a 1.2% drop in January.
Meanwhile, in Chile, mining continued to be the country's main export, generating 49% of total export revenue between January and February 2024. Mining exports totaled US$8.18 billion, a 5% year-on-year increase on the back of higher sales of copper concentrates (+25%), gold (+48%), iron (+12%) and silver (+20%).
It is important to highlight that at the time, Claudia Sanhueza, Undersecretary of International Economic Relations of Chile, applauded the good performance of the country's mining in the first two months of the year. During the period, total exports went to US$30.18 billion,a surprising drop of 0.73% compared to the first two months of 2023.
However, in March, the downward trend continued in the mining sector. According to figures from the Central Bank of Chile, sector exports fell by 10.5% year on year, to US$ 4.70 billion. As in Peru, copper shipments decreased significantly, despite higher international prices. As an example, Chilean exports of the red metal totaled US$ 4.09 billion, 5.5% less than in March 2023.
FALL OF COAL AND NICKEL AFFECTS COLOMBIA
Meanwhile, mining exports in Colombia kept a significant share in the country's total foreign sales in January-February, accounting for 26.7% of the total. However, this represents a notable decrease of 25.2% compared to the same period of the previous year, reaching a total value of US$ 1.98 billion FOB, according to the Mining and Energy Planning Unit (UPME). This decrease is mainly attributed to the reduction in international prices for thermal coal and nickel, two key products in Colombia's export basket.
Despite the above, it is important to highlight that some categories within the mining sector showed an increase in their FOB value. Specifically, gold exports recorded a slight growth of 0.7%, while other minerals experienced significant increases of 22.3% compared to the same period of the previous year, UPME says in their March report.
The increase in the FOB value of certain mineral products could be a positive sign, amid a challenging context for the mining sector in Colombia, the report concludes.
Finally, the dynamics of the Mexican mining sector show that it faced challenges during the first quarter. One of such challenges was the slowdown of the Mexican economy. After having expanded by 3.2% during 2023 --the lowest rate in three years-- its dynamism is expected to decrease even in 2024 and 2025, rising by just 2.4% and 1.9% respectively, according to the country's Center for Public Finance Studies of the Chamber of Deputies (CEFP).
This situation, the Center noted, affected the demand for various minerals, since it is directly associated with the cycle of industries such as manufacturing, which at the end of 2023 was already registering negative rates (fourth quarter, -1%). Furthermore, the Mexican mining sector would continue to face various challenges due to the lower dynamism of the global economy expected this year, which will affect external demand for minerals.
Likewise, according to the new Mining Law, it is estimated that by 2024 the budget assigned to the Mexican Geological Service (SGM) will reach US$ 71.7 million, representing just 4% of the US$ 1.63 billion tat the activity in the country requires annually, including investments by private companies.
The College of Mining Engineers, Metallurgists and Geologists of Mexico projected in March that if reforms continue in their current path, production could experience a decline from 2025 due to the lack of maintenance and replacement in operating mines. Consequently, there would be repercussions on the mining sector and other sectors that depend on minerals.
It was recently revealed that in the first quarter international sales of mineral products reached US$9.32 billion. According to the Ministry of Economy, the states with the highest foreign sales of minerals were Mexico City, with a total of US$ 8.18 billion, followed by Sonora, with US$ 845 million, and Coahuila de Zaragoza, with US$ 113 million. This distribution highlights the importance of these regions in the international mineral market during the period.
