MercoPress. South Atlantic News Agency

Booming black market for stolen copper

A black market for stolen copper cables has begun to flourish throughout Chile in recent months as delinquents attempt to cash in on the commodity's record high prices.

Through May of this year, about 850 people have been arrested for stealing or attempting to illegally sell the red metal. Lured by a black market price of between 4 and 8 US dollars per kilo, criminals are honing in on construction sites, telephone lines and copper wires of any kind.

According to electric company attorney Jorge Alvarez, several boroughs on the outskirts of Santiago are the worst affected by crimes of this kind. Copper cable thefts in neighbourhoods such as Lampa, La Pintana, San Ramon and Conchali have spiked more than 500% this year, he reports.

Nor are other parts of Chile immune to the crime wave. Although exact figures do not exist, it is estimated that at least 38,000 US dollars of copper cables have been stolen in Regions III, V, VIII, IX, and X in the last eight months.

Fifteen kilometers of copper cables were stolen this past April in Valparaiso.

Alexis Rogat, a public prosecutor in the Region III capital of Copiapo, admits that his city is in the midst of a copper-related crime wave. While between 30 and 50 cases of copper cable thefts were recorded in 2005, more than 20 cases have already been recorded the first four months of this year.

Although a 1995 amendment to Chile's Criminal Code requires citizens' report to police if they suspect that they are purchasing stolen copper, prosecutors say catching these criminals is often easier said than done.

"These gangs have many rural roads to use in order to escape," said Rogat, who believes that much of the copper stolen from Copiapo is transported to other parts of the country, to be stripped down and sold.

Consumer headaches and hefty company losses are the most frequent consequences of this kind of criminal activity.

CGE Distribution, Chilquinta, and Telefonica Chile report they have spent 50 million US dollars replacing stolen copper cables in the first four months of 2006. To put things in perspective, 50 million amounts to one third of what Chile is planning to spend on hospitals, police officers, and social assistance this year as a result of the nation's windfall copper profits.

Meanwhile, consumers often face interruptions in telephone and electricity services as a result of the theft.

Chile is the most important copper producing nation in the world, accounting for more than one third of all production. Half of the country's exports are copper.

The sky-high prices are driven by China's unquenchable demand and production problems in other copper producing countries like Mexico and Indonesia. In Chile, however, production has remained steady and income has soared in step with the sharp price increases.

With an average copper price of 2.64 US dollars per pound predicted in 2006, Chilean officials forecast the nation's Treasury will be receiving 11 billion US dollars this year from the red metal, up 69% from 2005. Copper prices shot up from a 14-year low in 2001, around 60 US cents per pound, to its current price of about 3.79 per pound.

In recent days some industry experts have asserted that copper prices are now artificially inflated. David Threlkeld, president of the commodities firm Resolved, said last week that he believes that 90% of the current copper price is purely speculative.

While acknowledging that world demand for the red metal will increase largely due to China's rapidly growing economy, he also said copper speculation is "rampant" and that consumers have already begun to adjust.

"Consumers are substituting for copper while we speak," Threlkeld said. "When the copper bubble pops, there will not be enough buyers to absorb the excess supplies."

Threlkeld estimates that copper will face a price correction of between 33 and 66% in the near future. In other words, the price of copper could fall to 1.25 US dollars a pound. "The commodities market is not a casino," Threlkeld bluntly warned.

Copper production costs in Chile vary according to each company and mine site, but most companies produce copper at about 60 US cents per pound. By Matt Malinowski The Santiago Times - News about Chile