SANTIAGO, Chile – Chile’s mine-union leaders were meeting Thursday to decide whether to join a walkout that has stopped production at the world’s most productive copper mine.
The strike at the privately held Escondida mine is already a week long with no end in sight, and the question is whether they’ll be joined by workers at other mines including those run by Codelco, Chile’s state-owned copper company.
Escondida, which is majority-owned by Australia’s BHP Billiton Co., formally declared late Wednesday that it may not be able to honour its copper contracts for reasons beyond its control. The declaration also means that it could fire the union workers and try to bring in strikebreakers to work the open-pit mine in far northern Antofogasta, which produces 7 per cent of the world’s copper and is so large that it can be seen from space.
Analysts predicted that this could lead to even more labour unrest in Chile, reducing supplies to an already very tight market. Escondida says the strike has reduced its production by 18,000 tons at a cost of $180 million.
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“There is also the danger that the strike could turn hostile if BHP Billiton brings in strike breakers to resume operations at the mine. Workers have threatened to take over the deposit if that were to happen. Given the general feeling of labour unrest in Chile we believe this would increase the risk of sympathy strikes at other facilities,” Barclays Capital said in its Thursday commodity briefing.
The union meeting in Antofogasta included representatives from the unions at Escondida and Codelco as well as the Collahuasi mine – the world’s third largest. Those workers are already on strike alert but are continuing negotiations with their management to resolve contract differences.
Already, 15,000 tons of copper production have been lost, with 2,500 more tons denied to the global supply chain each day the Escondida strike continues, Barclays estimated.
The immediate effect on BHP stock was minimal, with markets more focused on the U.S. and European debt crises, which are expected to reduce demand over the long term. However, copper produced for September delivery rose 3 cents to $4.47 a pound on Thursday, partly on concerns about tight copper supplies.
Investors also are turning to copper and other metals as they dump stocks, bonds and dollars ahead of Washington’s Aug. 2 deadline to resolve its debt negotiations, said Edward Meir, an analyst with the Chicago-based MF Global Inc. commodities trading firm.
Chile’s government has tried without success to help resolve the strike at Escondida, where 2,350 workers who walked out a week ago were joined Wednesday by 7,000 contractors. Although Escondida executives rejected a government offer to sponsor talks, Jobs Minister Evelyn Matthei and Mining Minister Hernan de Solminihac reiterated offers to help on Thursday.
The Escondida workers have seen their monthly production bonuses decline from $650 to $195, and want increases that would amount to more than $10,600 a year. The company considers the contract fixed and the strike illegal, and has said it won’t budge from $6,000 a year.
Chilean President Sebastian Pinera did seem to defuse a threat by Codelco union leaders to go on strike for reasons unrelated to Escondida, however. Copper Workers Federation President Raimundo Espinoza said he left Wednesday’s meeting with Pinera and his ministers convinced the government won’t try to privatize the Gabriel Mistral mine, known as Gaby, which promises to be one of Codelco’s most productive in years to come.
Codelco’s board also recently approved a $3 billion investment in the Nuevo Nivel Mina project, aimed at keeping the world’s largest underground mine, El Teniente, productive for another 50 years, Meir noted. Codelco announced that the project will add 2 billion tons to Chile’s mineral reserves, including 17 million tons of refined copper.
“The Chilean president did meet with Codelco’s union, which is also mulling a strike, but that situation seems to be pacified at least for now, and fears of strikes spreading seem to be receding,” Meir said in his Thursday morning commodities outlook.
Thursday’s union strategy session in Antofogasta also included labour leaders from Dona Ines de Collahuasi, the world’s third-largest copper mine. They have already issued a strike alert as they discuss their demands with the company, which is mostly owned by Geneva-based Xstrata PLC and London-based Anglo American PLC.
Associated Press writer Michael Warren in Buenos Aires, Argentina, contributed to this report.