"We're facing one of the favourite teams who, like Germany, were favourites from the start", he told a news conference.
Coach Juan Antonio Pizzi suggested the demand for Sanchez is a boost to his self-esteem, saying: "We suppose he is very happy because he is going through a very special situation and I think everybody would like to be in this situation because the best clubs in the world want to have him in their squads".
Loew, in his 150th match in charge of Germany, maintained his impressive record of reaching the semifinals of every tournament over the last decade.
The world champions could face the European champions in Sunday's final if both teams come through their respective semi-finals.
"Yes, [facing Portugal] is tough, just as Mexico would have been", he said after their draw with Australia. "We are one of the best teams in Africa but there is still a difference between us and modern football". Now the four qualified teams move into the next round which is the semi-finals and even if they lose, they will still have a chance to play for 3 round.
However, it was not all good news as Bernardo Silva went off injured at halftime while a needless and reckless challenge from Pepe, with his side 2-0 up, earned the controversial central defender his second yellow card of the tournament, ruling him out of Wednesday's semi-final. Raphael Guerreiro is also still recovering from a left ankle blow he suffered in the 1-0 win over Russian Federation.
The result meant Chile finish runners-up in Group B to face Euro 2016 winners Portugal in Kazan for a place in Sunday's Confed Cup final against either Mexico or Germany who meet on Thursday in Sochi.
The Kiwi keeper was at close quarters with Cristiano Ronaldo for much of the contest in St Petersburg.
Portugal's Cristiano Ronaldo celebrates after scoring a penalty during the 2017 Confederations Cup match against New Zealand.