Codelco, the world’s top copper supplier, has warned that disruptions from the Middle East war will increase its production costs by approximately 5%, marking one of the first concrete inflation estimates from a major miner.
The state-owned Chilean company pegs the added burden at about 10 cents per pound, pushing its current cash cost of $2 per pound higher amid soaring diesel prices and supply chain pressures.
Chief Financial Officer Alejandro Sanhueza highlighted the impact of higher energy costs, pricier supplies, and a proposed suspension of a fuel tax credit by the Chilean government during an earnings presentation in Santiago. While the company has not yet faced direct fallout from the conflict, exposure to volatile international prices remains a key concern. “We are closely monitoring this situation,” Sanhueza noted.
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The broader context for copper miners is grim, with the Iran conflict driving up energy expenses, disrupting critical inputs like sulfuric acid, and pressuring commodity prices through fears of stagflation. Copper prices have already dropped nearly 9% since the war escalated, reflecting heightened short-term volatility.
Despite these headwinds, Codelco remains optimistic about long-term fundamentals. Sanhueza emphasized robust demand growth and constrained supply as key supports for copper prices, driven by trends like the AI-driven data center boom and the global shift to electric vehicles. “The long-term price fundamentals are quite strong,” he said.
Operationally, the company is pushing to recover from a 25-year low in output, with Chairman Máximo Pacheco aiming to restore production to pre-pandemic levels of 1.7 million tons annually. This ambition, which could see Codelco reclaim its position ahead of BHP Group, faces challenges from declining ore grades, project delays, and a tragic mine collapse in July that killed six workers. Still, last year’s price surge fueled a 23% jump in earnings before items, and slight production growth is expected in 2026.
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