Chile's state-owned copper miner, Codelco, is expected to produce less copper this year than previously forecast, according to sources familiar with the matter, as it faces a series of setbacks at its mines and projects. After losing its title as the world's largest copper supplier to BHP Group Ltd last year, the company is effectively abandoning the production plan it announced in April. That plan targeted 2025 copper output of 1.34 million tonnes, up from a revised 1.307 million tonnes the prior year. A further decline in 2025 output would be the latest blow for a company that has seen production slump and debt levels soar in recent decades.

Declining ore grades have driven Codelco's 2025 copper production to its lowest level in 28 years. The company's repeated failures in revamping its aging operations highlight a broader industry challenge: as rising demand from data centers and electric vehicles fuels a copper boom, developing new copper resources is becoming increasingly difficult and expensive. Under new Chairman Bernardo Fontaine and CEO Jorge Gómez, Codelco now aims to stabilise production near current levels over the next few years, rather than pursuing the 1.7 million tonne target set by former Chairman Máximo Pacheco. The new management has pledged to prioritise profitability over production scale, maximising contributions to the state while preventing Codelco's record $27 billion debt burden from growing further. The company is expected to unveil a recovery plan later this year, which includes streamlining capital expenditure. Codelco is also evaluating potential asset sales and seeking more partnerships with private companies to develop mining assets.

Amid a global surge in copper demand, one of the world's largest mining companies finds itself in a precarious position. Besides facing scrutiny over a fatal accident and inflated production data, the company is also struggling under $25 billion in debt. In late July 2025, a cave-in at Codelco's most profitable mine, El Teniente, killed six workers, marking Chile's worst mining disaster in decades and halting work on a key expansion area. An internal audit found "inconsistencies and concealment" in technical reports related to a rockburst incident at the same mine two years earlier, leading to the dismissal of three senior executives. Prosecutors and regulators are investigating whether the 2023 reporting failures hampered oversight of risks and ultimately contributed to the deadly cave-in last year. Codelco also faces multiple probes into inflated production data, which helped the company meet its targets. An internal review revealed the miner overstated 2025 copper output by nearly 27,000 tonnes, or about 2% of production. These scandals have intensified a long-running debate over whether Codelco needs more fundamental reforms, including a greater role for private capital, according to the Chilean Mining Council. Despite more than $100 billion in mining investment over the past decade, the country's copper output has stagnated.

Codelco's problems come at a time when Chile's public debt is rising and the fiscal deficit persists, weakening the government's ability to support the company's investment needs. As the copper market faces a potential massive supply gap, policymakers and industry groups are exploring ways to reform the mining giant to cut debt and boost returns. These options include selling assets, cutting spending, expanding joint ventures, and sharing infrastructure. If Chile does not act, Codelco could miss out on a historic surge in copper consumption, with artificial intelligence and the energy transition already driving copper prices to record highs. According to BloombergNEF, the gap between global copper demand and supply is projected to widen to 7 million tonnes by 2035. A study by S&P Global shows that demand from AI, data centres, and defence sectors is expected to roughly triple by 2040, adding 4 million tonnes of new demand annually. Goldman Sachs analyst Samantha Dart and her team wrote in a note to clients last month that after the US-Iran war, rising geopolitical tensions have further boosted spending on electrification, renewable energy, AI, and defence, which could continue to drive copper consumption. However, fast-growing demand is colliding with declining ore grades, aging mines, and a lack of new projects. Kwasi Ampofo, head of metals and mining at BloombergNEF, said Chile is a prime example of this challenge. According to BloombergNEF's long-term supply model, as existing mines deplete, Chile's copper output is expected to fall from its current level of about 5.4 million tonnes to around 4.2 million tonnes by 2050.

Codelco is particularly vulnerable because its mines are becoming deeper and more complex, requiring more capital. The company's ore grade, a measure of the metal content in mined rock, is declining, pushing up costs and reducing the amount of copper that can be recovered. Codelco's copper production costs are more than 50% higher than the average of the world's top three copper miners. Unlike other major producers, the miner's operations are still highly concentrated in a single country. Although Chile remains the world's largest copper producer, its global share has fallen from over a third in the mid-2000s to less than a quarter today, with Codelco at the heart of this decline. The company's output is now about 30% below the levels envisioned two decades ago. Despite state backing and an investment-grade rating from S&P Global Ratings, the company's debt metrics are among the worst in the industry. As Chile debates how to revitalise the mining giant, the outcome will help determine whether the world can bring enough new copper supply to market.