Copper output in Chile, the world's largest producer, may fall in 2009 as the industry is hammered by low prices for the red metal, the director of the CESCO copper industry think tank said on Friday.

CESCO Executive Director Juan Carlos Guajardo told Reuters in an interview that he saw copper output coming in at about 5.3 million tonnes this year, either unchanged from a year earlier or down as much as 1 percent.

The CESCO outlook is far more pessimistic than a Chilean government report last week for a 3.7 percent rise in production this year.

Chile copper miner Antofagasta Plc said this week it was closing a small Lince open pit mine in northern Chile because of lower prices, the latest in a series of global copper industry project casualties.

If you look at the 19 largest mines in Chile, 10 saw falling production last year (2008), so we are talking about more than half of Chile's mines with falling copper (output), said Guajardo.

CESCO is a not-for-profit industry think tank whose members include companies producing much of the world's copper and which hosts one of the world's biggest copper meetings annually in Chile.

Guajardo said a study conducted CESCO showed planned investments for the sector have fallen 25 percent in dollar terms in Chile since September, to close to $27 billion as of early January from some $37 billion when the industry was still in an extended price boom and costs were soaring.

Global copper prices have plummeted since then to close to $1.50 a pound, from record highs of over $4 last July.

Guajardo said he estimated average copper prices would range between $1.50 and $1.80 in 2009.

For Chile's mining industry over all, Guajardo said planned investments fell 38 percent from September, led by projects in iron and steel and, to a lesser extent, molybdenum mining.

Of roughly $10 billion in investment plans put on hold in the copper industry, nearly $7 billion are attributable to No. 1 diversified miner BHP Billiton, majority owner of Chile's Escondida, the world's largest copper mine.

The CESCO report showed Escondida could postpone its Phase Five expansion, originally planned for 2013, and the building of a new complex to desalinate sea water for ore processing, planned for 2012.

Guajardo said some delays came as miners wait for equipment and material costs to fall back in line with copper prices.


Guajardo said the copper market could see a slight rebound in the second half of the year, if copper inventories prove less robust than currently thought.

Most industry analysts predict copper inventories, until recently in deficit and underpinning booming prices, will come in near 300,000 to 400,000 tonnes this year.

Now I'm seeing stats between 100,000 and 200,000, Guajardo said.

Copper prices are already up from close to $1.20 per pound just weeks ago, in part because they crossed the threshold below the minimum costs of even the most efficient producers.

And financial market turmoil has not punished the copper price as much as some had predicted.

This is something that draws attention and gives pause for thought, Guajardo said. One starts to look at the factors behind this.

China, he said, is giving signs for optimism, importing more copper than expected in December at a time when China bank loans rose.

So there are some positive signs, although of course there will continue to be bad news in the first half, which will lower average copper prices. (Editing by Marguerita Choy)