"The lower copper price (forecast) is chiefly due to downwardly revised GDP growth and industrial production in the main copper consuming countries, as well as lower demand expectations," state copper commission Cochilco said on Tuesday.

Copper prices have shed 12 percent since the beginning of May on mounting fears of deteriorating economic outlooks in top metals consumer China, the euro zone and the United States.

But expectations for central bank stimulus measures amid signs of global economic weakness have helped to limit copper's downside, keeping prices locked in a trading range between $7,200 a tonne ($3.25 per lb) and $7,800 a tonne ($3.55 per lb) since mid-May.

BATTLING ON SEVERAL FRONTS

Chile, which produces about one-third of the world's copper, is seen mining 5.404 million tonnes this year, significantly down from a previous projection of 5.7 million tonnes.

The reduction is larger than the output of No. 1 copper producer Codelco's giant Andina mine, which produced about 234,400 tonnes of copper last year.

Chile's projected copper output would be a 2.7 percent increase from last year's production.

The Andean country is battling fiercely dwindling ore grades in its ageing mines, an uptick in labor actions, worker accidents and extreme weather. But some expansions of its behemoth mines and a few new deposits have lifted output in recent months.

Chile's 2012 production will be boosted by a recovery in the world No. 1 copper mine, Escondida, majority owned by BHP Billiton Ltd, as well as higher output from Anglo American Plc's disputed Los Bronces mine, Freeport-McMoRan Copper & Gold Inc's El Abra and Antofagasta Minerals Plc's El Tesoro, Cochilco said.

But it added lower ore grades and operational problems will hurt output from state copper giant Codelco, Anglo and Xstrata Plc's Collahuasi, Freeport's Candelaria and BHP'S Cerro Colorado.

A Cochilco official told Reuters the downwardly revised output forecasts were due to lower production at Collahuasi and Codelco.

Production at the world's No. 3 copper mine, Collahuasi, is expected to improve in the second half of the year from the first six months, but its full-year output will likely still be below last year's levels, a company executive said last month.

Codelco produced a record 1.735 million tonnes of copper last year, but the firm forecast its 2012 output will dip before rising to 2.1 million tonnes by 2020 as its ambitious expansion plans come on line.

Production in 2013 is expected to reach 5.51 million tonnes due to a recovery in output from Codelco, Escondida and Collahuasi, Cochilco said. (Reporting by Santiago newsroom; writing By Alexandra Ulmer; editing by Jeffrey Benkoe)