PROSPECTS FOR GROWTH OF SOVIET IMPORTS OF COPPER FROM CHILE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001500270003-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 11
• Document Creation Date: December 12, 2016
• Document Release Date: March 12, 2002
• Sequence Number: 3
• Publication Date: March 14, 1963
• Content Type: BRIEF

CONFIDERMt For Release 2002/05/07: CIA-RDP79T01003A001500270003-3
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Current Support Brief
PROSPECTS FOR GROWTH OF SOVIET IMPORTS
OF COPPER FROM CHILE
CIAiRR CB 63-27
14 March 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
GROUP 1
Excluded from automatic
downgrading and
declassification
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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PROSPECTS FOR GROWTH OF SOVIET IMPORTS
OF COPPER FROM CHILE
Soviet purchases of copper from the Chilean government, which
began late in 1962 apparently as part of Soviet Bloc efforts to expand
commercial relations and to establish diplomatic ties with Chile, may
increase substantially in 1963. Soviet purchases in the last 4 months
of 1962 totaled about 4, 000 metric tons (mt). If continued at this monthly
rate in 1963, purchases by the USSR will absorb about half the production
of Chilean government-owned facilities. Because, in effect, the USSR
has been buying Chilean copper from dealers in West Germany, the USSR
could absorb purchases of this magnitude from the Chilean government
without disrupting existing Soviet trading relations with other countries.
With regard to longer run prospects, the USSR has expressed interest
at various times since mid-1960 in procuring up to 60, 000 mt of Chilean
copper annually under a 5-year contract, with at least part of the exchange
involving a barter arrangement. Although earlier negotiations on such
contracts broke down, ostensibly because the Chilean government had in-
sisted on payment in hard currency only, eventually the Chilean govern-
ment may be more willing to accept a long-term contract as a means of
disposing of output from the nationalized sector, which is being expanded,
if adequate markets elsewhere are not developed. On the other hand, a
restraint on conclusion of such long-term arrangements may come from
the Chilean government's concern about the reaction of the large US-
owned subsidiaries, whose investment is essential to attainment of the
higher production goals for copper established under the Chilean 10-year
plan.
1. Imports in 1962
During September-December 1962 the Chilean national mining en-
terprise, ENAM1, sold to the Soviet trading corporation RAZNOIMPORT
three lots of copper, as shown in the following tabulation 1/:
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Period
Quantity
(Metric Tons)
Value
(Thousand US $)
September
1,000
644
November
1,950
1,300
December
800 to 1,000
515 to 644
In the first two transactions, and presumably in the third one, ENAMI
agreed to ship blister copper from the government-owned smelter at
Paipote to Hamburg, where it was to be electrolytically refined. When
the copper was available for shipment to the USSR, RAZNOIMPORT was
to pay the current average London market price in pounds sterling.
A noteworthy feature about these government-to-government transac-
tions is that they changed the names of the contracting parties but not the
origin of Soviet imports. ENAMI has regularly exported blister copper
to Hamburg for refining and subsequent sale on the open market, 2/ and
West Germany has regularly exported refined copper to the USSR -- for
example, 13,100 mt in 1959 and 16, 300 mt in 1961. 3/
2. Soviet Intentions to Buy Chilean Copper in 1963
The available evidence indicates that the USSR intends to continue
purchasing Chilean copper in 1963, perhaps on a more regular basis.
In December 1962, Soviet trade representatives reportedly told Chilean
government officials that they planned to continue purchasing copper in
small lots. 4/ In February 1963 the American Metal Market reported
that the USSR was offering to buy copper from the Chilean government
"on a monthly basis throughout most of 1963. '1 5/
3. Chilean Copper Position
The copper industry of Chile, supported by very large reserves,
has ranked among the top producers in the world. The reserves, esti-
mated to exceed 2 billion mt, 6/ rank second in the Free World only to
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those found in Rhodesia. Chilean production of copper amounted to about
586,000 mt in 1962, probably second highest in the world. 7/
The bulk of the Chilean copper industry is made up of three subsid-
iaries of two US firms, as follows: the Braden Copper Company, a sub-
sidiary of the Kennecott Copper Corporation, and the Chile Exploration
Company and the Andes Copper Mining Company, subsidiaries of the
Anaconda Company. These subsidiaries accounted for about 83 percent
of Chile's total production of copper in 1961, as follows: about 89 per-
cent of the blister copper and 96 percent of the refined copper, including
all the electrolytically refined copper, as shown in Table 1.
The rest of the Chilean copper industry consists of a number of
smaller enterprises, some privately owned and some government owned.
Among these, the most important ones are the Paipote smelter, having
a capacity for producing about 25,000 mt of blister copper annually, and
a privately owned plant with a capacity for producing about 12, 000 mt of
fire-refined copper annually. Also, there are a number of compara-
tively small privately owned copper fabricating plants having a combined
capacity for producing about 56,000 mt of copper products annually. 8/
Copper metal apparently has been supplied to the fabricating plants by
the US subsidiaries and by the plant producing fire-refined copper. Be-
cause of a lack of demand, however, only a small share of the fabricating
capacity has been utilized recently -- about 20 percent late in 1961. 9/
The Chilean government announced in 1962 a 10-year development
plan for the copper industry under which production of copper is to in-
crease about 50 percent during the plan period. 10/ In addition to in-
vestment by US-owned subsidiaries, which is to play a dominant role in
the plan, investment by West German firms will play an important role
in expansion of the nationalized sector of the copper industry.
The first of two important projects undertaken by ENAMI with the
aid of West German capital is a sm'plter at Las Ventanas (near Valparaiso),
for which equipment is to be supplied and installed by a West German
firm. 1.1/ The smelter is designed for an annual output of 25,000 mt, 12/
and construction is nearing completion. 13/ When the project is com-
pleted, ENAMI will have at its disposal a total of 50,000 mt of capacity
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Table 1
Production of Copper in Chile a/
1961
Metric Tons
Refined Copper
Organization
Electro-
lytically
Refined
Fire-
Refined
Blister
Copper
Copper
Concen-
trate
Total
Large Mining Industry
Chile Exploration Co. Li
0
0
96,344
0
96,344
Andes Copper Mining Co. b/
0
0
72,841
0
72,841
Braden Copper Co. c/
153,737
61,825
96,493
0
312,055
Total large mining
industry
153,737
61,_815._
265,678
o
_
481,24o
Medium and Small Mining
Industry
Paipote smelter a/
0
o
21,700
0
21,700
Chagra smelter e7
0
0
11,773
0
11,773
Empresa Minera de Mantos
Blancos S.A. 2/
0
9,600
0
0
9,600
Others
0
0
0
53,231 f/
53,231
Total medium and small
mining industry
0
9,600
24,473
53,231
96,30
Aggregate total
153,737
_71,425
299,151
53,231
577,544
a, 14/. Intermediate products are not recorded except when they are dis-
posed as such.
b. A subsidiary of the Anaconda Company, a US firm.
c. A subsidiary of the Kennecott Copper Corporation, a US firm.
d. A Chilean government enterprise.
e. A privately owned enterprise.
f. Processed from privately produced ore.
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for producing blister copper. The second project is an electrolytic re-
finery that is to be located at Las Ventanas adjacent to the smelter and
is to have an annual capacity of 42,000 mt initially and 65,000 mt when
completed. 15/ This capacity will be sufficient to refine all of the
blister copper produced by the national sector of the economy. Comple-
tion of the initial stage of the refinery is scheduled for mid-1965. 16/
Anticipating that markets must be found, the Chilean government has
established a promotion center whose membership includes both ENAMI
and the US-owned subsidiaries. Emphasis is being placed on developing
markets in Latin America, where per capita consumption of copper is
well below the world average. 17/
4. Soviet Copper Position
The USSR has been importing comparatively large quantities of cop-
per from the Free World in recent years, but the quantity imported
annually has been decreasing steadily since 1959, the first full year after
the elimination of the Free World (COCOM) embargo on the sale of copper
to Bloc countries. During 1959-61 the USSR imported an average of
113,000 mt of copper per year from the Free World, but the quantity
imported decreased about 28 percent during the period, from about
127, 000 mt in 1959 to about 92, 000 mt in 1961. The available data on
Soviet imports during the first half of 1962 suggest that a further de-
crease in the rate of imports took place. Soviet imports of copper dur-
ing the 1959-61 period are shown in Table 2.
The short-term trend of decreasing Soviet imports of copper, a
result mainly of increased domestic production -- in 1962, Soviet pro-
duction probably approached the level of 600, 000 mt -- and of increased
substitution of other materials for copper, may continue for the next
few years, but the USSR almost certainly will not close the gap between
requirements and production for some time. Thus to meet fully the
requirements for internal programs during the next few years, the
USSR probably will have to continue importing copper from the Free
World.
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Table 2
Soviet Imports of Copper from the Free World a/
1959-61
Thousand Metric Tons
Origin
1959
1960
1961
Total
127.1
119.7
91.5
Sweden
6.8
7.2
10.2
UK
26.3
17.7
18.6
West Germany
13.1
22.2
16.3
Rhodesia and Nyasaland
45.1
39.0
20.6
Uganda
10.9
7.5
6.7
Others b/
_
24.9
26.1
19.1
a. Including ingot, wire bars, and such wrought forms of copper
and copper alloys as rolled metal, bare wire, and castings and
forgings. Compiled from data available in the files of this
Office.
b. The composition of this group has changed from year to year.
For the 3-year period the entire group was made up of the follow-
ing countries: Angola, Australia, Austria, Belgium, Canada, Fin-
land, France, Mexico, the Netherlands, Peru, Portuguese East Africa,
Union of South Africa, Turkey, the US, and Yugoslavia.
5. Negotiations on Long-Term Contracts
Since about mid-1960 the USSR has shown interest in negotiating a
contract to buy up to 300,000 mt of Chilean copper over a 5-year
period. 18/ In mid-1961 the USSR offered to buy annually 25, 000 mt
of refined copper for hard currency and 35,000 mt of semifabricated
copper products on a barter basis for industrial equipment, 19/ the
barter end of the proposal apparently reflecting Soviet awareness of
the general lack of demand for Chile's copper fabrications. The Chilean
government, unwilling to enter a barter arrangement for copper, re-
jected the proposal, 20/ and negotiations were suspended. 21/ In
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December 1962 the Soviet trade mission, in effect, may have renewed
the proposal for a barter deal. According to a report in the American
Metal Market, the Soviet representatives were seeking a trade agree-
ment with Chile for 1963 under which the USSR would acquire Chilean
products, presumably copper, and in turn would supply Chile with zinc,
aluminum, and machinery. 22/ Whether or not this report is true, it
is to be expected that the USSR will make further attempts to obtain a
share of the Chilean output of copper under a long-term contract of one
kind or another.
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