Codelco, the world's largest copper producer, reported Q2 2026 production fell 4% short of targets, continuing a pattern of operational underperformance driven by declining ore grades at its Chuquicamata and El Teniente mines. The state-owned miner has invested heavily in converting open-pit operations to underground block-caving, but ramp-up has been slower than anticipated.
The shortfall compounds the global concentrate supply problem that has driven spot treatment charges to negative levels. Chile's overall copper output is expected to decline further in 2026, with Cochilco forecasting a 2.5% drop due to aging mines and water scarcity. New projects like Quebrada Blanca Phase 2 and Centinela help offset declines but not enough to meet growing demand.
S&P Global's long-term outlook shows a cumulative mine-concentrate deficit of approximately 3 million tonnes by 2036 absent major new discoveries. The concentrate crunch has forced Chinese smelters to reduce run rates, with some cutting output by 10-15% in Q2. This dynamic is expected to keep refined copper markets in deficit despite recent visible inventory builds.