Codelco and Escondida exports show USD1,700 million lessening as of May
09-Jul-2012 Diario Financiero – News
Drop in production levels and lower prices are threatening second quarter results
Codelco and Escondida exports show USD1,700 million lessening as of May
Copper and cellulose large size companies booked US$2,600 million reduction in exports at May
Copper and pulp prices are causing a deep sales diminution in main Chilean export companies.
In accordance with information provided by ProChile the consolidated report of the 20 companies leading the ranking of export figures representing almost 60% of whole sales the country made to foreign purchasers shows that eleven companies are reporting reductions that exceed US$2,600 million in exports up to May this year if compared against same period in 2011.
The drop could not be offset against the companies that showed increases in their exports for extra US$1,130 million.
The two top companies in the ranking – Codelco and Escondida – have suffered the main detrimental effect by booking US$1,692 million reduction in sales to foreign customers during the first five months of this fiscal year which represents 15.8% drop with respect to same period in 2011.
The state-owned copper company itself represents most of the drop with US$1,178 million reduction of exports compared against same period last year. Main Codelco’s customer is China and deliveries to that country gather a 8.1% setback. Some important sources from the state-owned company have informed that the drop is the result of lower production which had already been forecasted for this first semester and they acknowledge that as a consequence – besides higher energy costs and low mineral price – the company results will experience a negative impact as well. The state—owned company already suffered a 35.3% profit reduction during the first quarter of this year.
In the meantime, Escondida has reported a 15.4% drop in their profits up to March attributable to sales reduction. Shortly before the company had informed their mining projects are producing low grade mineral which must be counteracted with the new projects already in portfolio. There are also other companies which have reduced their export activities, i.e. Anglo American North, Enami, and Los Pelambres.
The cellulose effect
As for cellulose business area, Arauco and CMPC have reported a decrease almost reaching US$180 million, i.e. 14.2% less than May last year. Analysts agree that the trend for this commodity price for next 6 to 12 months will be moving downwards which will have impact on cellulose business results for second and third quarters this year. Cellulose sales represent 70% of Arauco and CMPC EBITDA. With such a low comparison base an upturn may be expected for 4th quarter.
José Manuel Edwards, Analyst of IMtrust, and Rodrigo Ordóñez of Santander GBM, are forecasting the same situation as they foretell inefficient producers will be closing their plants because their costs will be higher than market price. This would result in prices settling around US$ 860 to US$ 880/ton for Pine cellulose and US$735 to US$ 740 /ton for Eucalyptus cellulose.
Price development
Drop of these products prices is one of main reasons for this distressing difference with respect to first months last year.
Thus, for the same period last year copper price moved from US$ 4.29 average down to US$ 3.73 this year. It means, 13.1% lower which is 2.7 percentage points lower than exports reduction figure.
On the other side, cellulose price dropped 13.6% when comparing average prices of both periods.
