The shine may soon come off Chile's decade-long copper boom as technical and regulatory problems in getting new mines into production highlight just how hard it will be to keep ratcheting up the supply.

Chile is expected to produce a record 5.83 million tonnes of copper this year, rising to 6.23 million next year, state copper commission Cochilco forecast on Friday. Many in the industry are confident new mines will keep boosting supply, and are worried more by falling demand in the key buyer, China.

But the optimism over output may be misplaced. Already, the official estimate for production in 2014 has been downgraded twice, cut from 6.07 million tonnes - a drop equivalent to the output of a medium-sized mine - after teething problems at three new projects and falling output at older ones.

And soon the growth of recent years will likely grind to a halt, industry experts say.

"Next year and towards 2016 we will see the peak of production in this decade but I don't think we will see very significant increases in Chile until the next decade, when we hope large projects in the pipeline will be unblocked," said Juan Carlos Guajardo, head of local copper think-tank CESCO.

CESCO sees growth in new production falling off sharply after 2016, with a market "balanced or in deficit through to the end of the decade", Guajardo said.

The easy pickings in Chile have gone, leaving miners to scrabble through stony and contaminated ores at remote locations, where water is scarce and energy expensive.

The investment environment is also not as welcoming as it once was. Some tax incentives were recently removed by President Michelle Bachelet's new center-left government. Workers are demanding a greater share of the pie and more local communities, often backed by the courts, are fighting against projects they see as degrading the environment.

This month, for instance, Goldcorp's $3.9 billion El Morro gold and copper mine was halted by Chile's Supreme Court, which said the company must consult again with local indigenous groups.

"It is a structural phenomenon and it is very much linked to greater technical challenges and regulatory compliance, which new projects have had to deal with," Sergio Hernandez, vice-president of Cochilco, told Reuters.

FADING FAST

Chile's copper production has risen in fits and starts from 5.41 million tonnes in 2003 to 5.78 million last year.

That far outweighs production in any other country and Chile still accounts for more than 30 percent of output worldwide, although its share is falling. [ID:nL5N0OT4RR]

Sales of the base metal, used in wiring and construction, are crucial for the Andean country's economy, accounting for over half its export revenue.

But many of Chile's older mines are fading fast. Century-old Chuquicamata, for instance, has seen production since 2004 fall from 983,000 to 752,000 tonnes, according to Cochilco figures, which include ouput from the nearby the Radomiro Tomic mine.

New mines are helping to bridge the gap. Three smaller projects that were not in operation in 2004 produced nearly half a million tonnes in total in 2013.

Some older open pit mines such as Chuquicamata hope to keep ticking over by going underground, while others are turning to new technology, such as Radomiro Tomic, which is employing bioleaching.

Efficiency improvements have boosted production at projects such as Glencore and Anglo American's Collahuasi. But the increase has been from a low base and the pace of growth is unlikely to continue, industry experts say.

Meantime, new projects, even once they obtain the necessary permits, face a raft of problems.

Earlier this year, state-run Codelco [COBRE.UL], the world's top copper producer, had problems with a key piece of equipment designed to remove arsenic from ore at its new Ministro Hales mine, leading it to cancel some sales in China.

Labor conflicts pushed up costs and delayed the start of JX Nippon's Caserones mine, while KGHM's Sierra Gorda raced to begin production on time, increasing its spending on engineering as it did so.

Sierra Gorda's project head, Maciej Sciazko, said KGHM wanted to be a low-cost producer so it could invest in an expansion of the mine but that "energy costs were a major concern".

Like other miners, KGHM is also keeping a fearful eye on the falling copper price, down around 10 percent so far this year.

"At current copper prices, although (the problems) aren't a disaster, they are not an incentive to speed ahead with the mine, particularly if you are a privately run producer," one market operator said.