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Global Copper Supply at Risk As Workers Vote to Strike

CommoditiesAug 01, 2021 09:00PM ET
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© Reuters. Global Copper Supply at Risk As Workers Vote to Strike

(Bloomberg) -- A tightening global copper market is facing the real possibility of simultaneous strike disruptions at three mines in Chile, the biggest producer of the metal.

By far the most serious threat to global supplies comes from Escondida, the biggest copper mine in the world, where workers rejected owner BHP Group’s final wage offer in voting last week. Unless the two sides can reach a deal in government-mediated talks this week, the market may be left without production from a project that last year churned out 1.2 million metric tons.

Two other smaller mines -- Codelco’s Andina and JX Nippon Mining & Metals’ Caserones -- are in the same situation as a country that accounts for more than a quarter of global copper navigates a slew of collective bargaining at a particularly sensitive time in the metals cycle and in Chilean politics.

The labor tensions are intensifying just as trillions of dollars in government stimulus fuel demand for industrial metals. Copper futures have gained about 4% in the past two weeks after retreating from all-time highs in May.

The ensuing windfall for producers is emboldening mine workers, with host nations looking at ratcheting up taxes to help resolve economic inequalities exacerbated by the pandemic. In Chile, that’s all playing out as the nation drafts a new constitution that may lead to tougher rules surrounding water, glaciers, mineral and community rights, with presidential elections in November.

At the same time, mining companies are striving to keep their labor costs in check in a cyclical business and as ore quality deteriorates and prices of inputs start to rise.

In last week’s vote, members rejected BHP’s proposal by an overwhelming 99.5%. Union leaders say the company is dangling large one-time bonuses in exchange for longer hours and new demands in a bid to boost productivity and profit. BHP said its proposal included better conditions and new benefits and that it remains open to dialog.

“We hope that this strong vote will be the decisive wake-up call for BHP to initiate substantive discussions to reach satisfactory agreements, if it wants to avoid a lengthy conflict that could be the costliest in the country’s union history,” the union said.

©2021 Bloomberg L.P.

Global Copper Supply at Risk As Workers Vote to Strike
 

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