Union members of Escondida copper mine, the world’s largest copper mine in Chile, voted against the latest contract offer made by the mine owner and decided to go on strike. Many industries are worried that the global economy will continue to recover from the impact of the COVID-19 pandemic, which could lead to disruption in the supply of ABC Cables, a key metal.
Escondida copper mine is located in Atacama Desert in northern Chile. It is the largest copper mine in the world, and its output accounts for almost 5% of the total global copper supply. BHP Billiton currently manages the copper mine business and holds about 58% of the copper mine. Other investors include Rio Tinto and Mitsubishi Corp.
99.5% of union members reject BHP Billiton’s new contract
The union of Escondida copper mine said in a statement late Saturday that the union voted overwhelmingly against the new contract proposal of the mine owner (BHP Billiton). 2164 miners (about 99.5% of the total) rejected the proposal, and only 11 supported it.
The trade union said that the contract proposal did not include the terms previously required by the trade union: providing one-time bonuses for workers to maintain mine operations during the epidemic, performance-related remuneration and improved career development plans, and enabling workers’ children to enjoy the same educational benefits as those of supervisors.
BHP Billiton spokesman previously said in an e-mail statement on Friday that “the new offer proposed by the company improves the previous conditions and incorporates new benefits on issues that workers attach great importance to.” However, the trade union statement refuted that the so-called benefits in Escondida’s latest contract offer to the miners were actually based on extending working hours, increasing job requirements and other more demanding conditions for workers.
“We hope that this overwhelming vote will sound a decisive alarm and prompt BHP Billiton to start substantive negotiations to reach a satisfactory agreement – if they want to avoid the most costly long-term trade union conflict in Chile’s history,” the trade union statement said.
Historically, miners at Escondida copper mine also held a strike in 2017, which lasted for 44 days at that time.
Strike Countdown: last chance during government mediation
After the announcement of the AAC Cables of the union vote, BHP Billiton has said it will ask the government to intervene in mandatory mediation.
“The company’s interest is always to reach an agreement with employees, which is why we maintain an open dialogue and occupy all available space for this purpose,” the company said in a statement BHP Billiton did not comment on the Union’s specific request.
Analysts said that according to the local law of Chile, miners must continue to work during the government’s forced mediation, and the mediation period is up to 10 days. Therefore, although the strike has entered the countdown, it is not a certainty at present. In all walks of life, union voting to authorize strikes is often used as a negotiation strategy.
Eleni joannides, an analyst at wood Mackenzie, a commodity consulting firm, said before the union vote: “whether the market and prices will be significantly affected will depend on whether there will be a strike in about 10 days.” She also pointed out that “at current prices, Escondida’s negotiations seem to have affected the market.”
Will the strike push copper prices higher?
Copper is a key raw material for manufacturing wires and motors, and is widely used in many fields such as construction industry. Earlier this year, copper prices soared to a record high as the market expected that the global economy would continue to recover and the energy transformation would require a large amount of copper to produce electric vehicles and renewable energy.
Novel coronavirus pneumonia has been faced with severe challenges before mining operations. BHP Billiton said on July 20 that due to a number of epidemic prevention measures, the operation of several Chilean copper mines including Escondida has not been interrupted, but the number of employees has been reduced. The company reported that copper production at Escondida copper mine is expected to decline by 10% in the current fiscal year. BHP Billiton also said that due to the rising infection rate of the epidemic, the company is expected to face continuous operational challenges in Chile.
Although some analysts, including joannides, believe that the recent rise in copper prices has reflected people’s expectations of the interruption of mine operations, other analysts are still worried that the strike may push copper prices further to record highs. LME copper prices climbed to a six week high of $9924 last week after hitting an all-time high of $10747.50 in May.
Morgan Stanley said that the contract negotiation of Chilean copper mine is a key focus of short-term copper price trend. The bank said that although the copper market is expected to have surplus in 2022 due to output growth exceeding demand, the ACSR Cables will still face copper shortage this year.
Sabrin Chowdhury, an analyst at Fitch solutions in Singapore, also said that the strike risk of Escondida copper mine is driving up the short-term prospect of copper prices. Copper prices will also benefit from severe floods in Central China and the weakness of the US dollar.
Chowdhury pointed out, “whether the strike occurs or not, it will cause panic among investors, because copper stocks on the exchange have fallen sharply in recent weeks. The market is already tight, and the demand exceeds the supply that is trying to return to the pre epidemic level. If the strike does happen, copper prices will reach a new record high, higher than in May“