Workers at the world’s most productive copper mine, BHP Billiton’s Escondida in Chile, launched what they vowed would be a “long, hard” strike yesterday, causing jitters on world commodity markets.
Escondida is the first of several key mines worldwide where contracts expire this year, and markets are watching nervously to see how the strike impacts supply and prices.
“The company is sticking to its inflexible stance. This will be a tough fight. We’re ready to hold out as long as it takes,” said Carlos Allendes, spokesman for the Escondida miners’ union.
BHP Billiton, one of the world’s leading mining consortiums, has rejected workers’ demands for a 7% raise and bonuses of 25mn pesos ($39,000). It is offering bonuses of 8mn pesos, with no raise.
Like other miners, the Anglo-Australian company has had to cut costs as copper prices slid in recent years, from a record high of $10,190 per metric ton in February 2011 to $4,318 per ton in January 2016, to just over $6,000 today.
Ninety-nine per cent of the mine’s 2,500 workers voted Tuesday to strike, after government-mediated negotiations collapsed.
Workers have set up a protest camp outside the giant mine complex in the Atacama desert in northern Chile.
They say they have a war chest of $390,000 to sustain the strike.
They vow it will be the longest since 2006, when workers walked out for 25 days.
BHP Billiton, Escondida’s majority owner, has said it will suspend production for at least the first 15 days of the strike. It urged employees to remain peaceful.
Escondida produces 5% of global copper output, some 927,000 metric tons a year. The impact of the strike is already being felt throughout the copper industry.
“A strike at Escondida is important not just for the immediate effect on production and global balances, but also because it carries symbolic weight in a year when labour negotiations could affect over 2.5mn tons of mined supply — 12% of the world’s total,” said analyst Dane Davis of Barclays.
Eight other major copper mines in Chile and around the world face expiring contracts this year, meaning more tricky labour negotiations are in store.
Uncertainty is also clouding the outlook at another top the world’s second-biggest copper mine — Grasberg in Indonesia — where a smelters’ strike and regulatory snags have forced the majority owner, US firm Freeport-McMoRan, to announce production cuts.
Other experts sought to put the Escondida strike in perspective, however.
“It is worth noting that strikes in 2011 and 2006 lasted two and four weeks, respectively. This, combined with high copper inventory levels, will likely reduce the impact strike action would have on the copper price,” analysts at Natixis bank said in a note.
Copper prices have rallied in recent weeks, gaining 30% in less than a month — to $6,045.50 per ton at the end of November — on the back of US President Donald Trump’s infrastructure spending plans.
The red metal is a key component in electrical wiring, and demand for heavy machinery, electrical grids and telecommunication networks drives prices up.
Renewed appetite in China, the world’s biggest copper consumer, is also shaping the market.
China imported a record 4.95mn tons of copper last year, fuelled by Beijing’s stimulus spending on infrastructure.
The strike could mean China will face seasonal shortages, said Chris Wu, an analyst at consulting firm CRU.
Workers of the Escondida copper mine start an indefinite strike in Antofagasta, Chile, on February 9, 2017. Workers at the world’s largest copper mine, BHP Billiton’s Escondida in Chile, began an indefinite strike Thursday to demand pay increases, prompting concerns on world commodity markets.
