Amid reports of looting, chaos and soaring copper prices, perceptions are already magnifying the reality of the fall-out from Chile’s massive earthquake.
Devastating as it was, with the death toll surpassing 700 by Sunday night, both casualties and infrastructure damage in the country were seen as far lighter than could have been expected from the magnitude of the quake — due largely to the country’s relatively sophisticated infrastructure as well as the geographic location of the quake.
As the FT notes on Monday, geologists and engineers are already citing reasons why casualties and damage were relatively light considering the scale of the tremor — and compared with the utter devastation in Haiti after that country’s recent quake.
At magnitude 8.8, the Chilean earthquake released almost 1,000 times more energy than January’s Haitian quake. Yet, as the FT’s science editor Clive Cookson notes on Monday, while Chile’s death toll is likely to rise substantially over the next few days, it will be a “tiny fraction” of Haiti’s 200,000-plus loss.
A crucial factor for Chile is its identity as one of the most quake-prone countries on the Pacific Rim. This, as the FT explains, has ensured the country is well prepared for big shocks, with building codes that require shake-resistant construction and a rapid emergency response system.
Chile’s top copper mines also managed to escape much damage because of such factors — though commodities markets still reacted to the earthquake with precautionary buying of the metal.
In an effort to calm commodities markets, Santiago Gónzalez, Chile’s mining minister, said on Sunday that the country would honour all export commitments, citing its ample copper stocks.
But that hasn’t stopped copper prices soaring by the biggest amount in nearly a year on Monday. amid fears of supply interruptions and infrastructure damage to Chile’s copper facilities.
As Bloomberg reports on Monday, the May-delivery copper contract rose as much as 6.2 per cent to $3.4870 a pound, the largest intraday advance since April. Meanwhile, copper for three-month delivery on the London Metal Exchange surged as much as 5.6 per cent to a five-week high of $7,600 a metric ton and Jiangxi Copper, China’s biggest copper producer, climbed nearly 6 per cent in Hong Kong to HK$16.70.
Yet, as the FT points out, global copper inventories (as well as Chilean stocks) are near six-year highs, a fact that will help cushion the market from the impact of any short-term supply disruptions.
Analysts widely expect a continuing spike in copper prices this week amid market concerns. But the surge is likely to be short-lived, notes the FT — not least because the country’s top mines, mainly located in the country’s north, far from the quake’s epicentre (70 km south of the capital, Santiago) are intact and producing, including the world’s largest copper mine, Escondida.
The earthquake did hit several medium-sized mines in central Chile. Codelco, the state-owned company, halted production at its El Teniente and Andina mines, while Anglo American stopped activity at Los Bronces and El Soldado, reports the FT.
Even so, Codelco executives on Sunday said they were hoping to soon re-start production after minimal damage, while Anglo American said it was waiting for electricity to be restored following the earthquake.
The combined production of the four mines equals about 20 per cent of the country’s regular production. Overall, Chile produced about 5.3m tonnes of refined copper last year — just below a third of total global output, according to the FT which cites US Geological Survey data. On top of copper, Chile is a large exporter of other metals, including molybdenum.
Politically, however, the situation presents a huge challenge for the incoming administration of Sebastián Piñera, who is due to be sworn in as Chile’s new president on March 11.
Related links:
Economic tremors unlikely to be felt in the long term – FT
Infrastructure helps to stem casualties in Chile - FT