Copper’s stunning rally this week continued in New York on Thursday with the metal touching a high of $3.32 a pound ($7,310 a tonne), the highest since January 2014, before paring some of those gains as worries about labour-related supply disruptions in key producing regions resurface.
Workers at the Escondida copper mine in Chile, the world’s top producing mine by a country mile, fired an opening salvo in contract talks with part-owner and operator BHP that makes a quick resolution highly unlikely.
The union represents about 2,500 workers at the mine. Bloomberg interviewed union spokesman Carlos Allendes in Santiago on Wednesday:
“The company would be wrong to remain stubborn in its position that workers should earn less to give that money to shareholders.
“Workers have been educating themselves, we know the mine, the processes and our benefits inside out and they can’t fool us anymore”
The union is demanding a one-time bonus equivalent to 4% of dividends distributed to BHP shareholders in 2017.
That works out to about $34,000 per worker. It would be the biggest bonus payout to mineworkers ever in Chile and comes on top of a general wage increase of 5%, which is more than double the inflation rate in the South American nation. BHP has until next Friday to respond.
Due to its size, Escondida can on its own change global copper supply dynamics.
BHP, which owns 57.5% of the mine and partner Rio Tinto 30%, has spent nearly $8 billion expanding the mine (including a $3.4bn water plant) in the past five years to maintain output above one million tonnes. 2018 guidance is 1.18–1.23mt, up more than 30okt compared to last year.
That means Escondida, in production since 1990, is responsible for nearly 5% of the world’s primary copper supply.
Last year’s walkout lasted 43 days and ended only when workers invoked a legal provision that allows them to extend their existing contract by 18 months (to end July).
The 2017 strike at Escondida was the longest in Chile since the 74-day action at state-owned Codelco’s El Teniente mine in 1973, which took place shortly before the military coup that overthrew socialist President Salvador Allende.
While the market looks better supplied this year than previously thought, chances of supply disruptions are still high, according to the latest Bloomberg Intelligence copper report.
Negotiations still left to resolve – including Escondida – represent about 2.6 million tonnes out of global copper supply of some 22 million tonnes, BI calculates.
Copper spot prices are near the smallest discount to the one-year contract since April 2017 as traders brace for possible supply disruptions, Bloomberg reports. The Asian market is also tightening after Vedanta was ordered to close its 400,000 tonnes per year smelter in southern India following deadly protests.
Source: Mining.com
