• Codelco, a major Chilean producer, isn't planning output cuts
  • Copper dropped 29 percent in 2015 to the lowest in six years

In the unfolding commodities collapse, the world’s biggest copper miners have avoided most of the pain.

Only 15 percent of production is unprofitable, even with prices trading at a six-year low, according to data from Standard Chartered Plc. Producers in Chile, home to the biggest copper mines, are enjoying lower costs as the peso trades at the weakest level in a decade and energy prices stay depressed, an incentive to keep digging.

“They can keep on producing at the current price,” Gianclaudio Torlizzi, a partner at T-Commodity in Milan, said by phone. “That’s the real problem.”

It’s not just Chile. With the Federal Reserve preparing to raise interest rates, the dollar is strengthening against currencies from other major copper producers, including Indonesia and Zambia. That’s a major benefit for companies that sell metal into international markets in dollars and pay costs in the local currency. Codelco, Chile’s state-owned producer, has said it’s cutting costs and has no plans to lower production.

If supply keeps increasing and demand stays constrained by China’s economy slowdown, that’s a recipe for prices to fall even further. Copper has already tumbled 29 percent this year.

Weaker currencies have helped lower the average output cost of copper by 16 percent, according to Societe Generale SA. The bank estimates that Chile accounts for 32 percent of global production.

"Current production remains resilient out of these emerging markets," Michael Haigh, head of commodities research at Societe Generale in New York, said by phone. "They have an incentive to sell as much as they can, receive dollars and convert back into their local currency. And that’s what they’re doing."

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