Workers at the world’s largest copper mine in Chile are on strike after wage negotiations with Australian commodities giant BHP failed, casting a shadow of uncertainty over the commodity’s market on Wednesday.
The Escondida mine in northern Chile produces about five percent of the world’s copper each year, a sought-after metal used in everything from electrical wiring to rechargeable batteries.
A global oversupply of copper stocks should mitigate the immediate impact of the strike, analysts say. However, there are fears that the strike could have a negative impact if production remains slow for more than a week or two.
Australia-based mining giant BHP, which owns a majority stake in the giant open-pit mine, said reduced operations would continue while non-union employees implemented contingency plans.
Production at the Escondida mine came to a halt in 2017 when workers went on strike for 44 days, costing BHP $740 million and reducing Chile’s annual economic output by 1.3 percent.
Encouraged by rapidly rising world prices earlier this year, union representatives are demanding a larger share of the profits of the 2,400 workers they represent at Escondida.
The union said it had launched a “legal strike” to support its unmet demands, which include higher bonuses, shorter working days and compensation linked to the total number of years worked at the mine.
According to media reports in Chile, BHP had offered a one-time bonus of just under $29,000, which was lower than the $36,000 demanded.
Copper prices, which were still buoyant in May this year, have fallen again in recent months, and significant stocks of refined metal have built up in depots in China and elsewhere.
“Total inventories in warehouses monitored by the London and Shanghai stock exchanges have risen to levels not seen since the peak of the pandemic in early 2020,” Saxo Markets commodity analyst Ole Hansen said in a recent research note.
“Instead, we have seen inventories monitored by the major futures exchanges continue to rise rapidly, indicating a period of major supply-demand imbalances, primarily driven by weak demand.”
BHP’s share price in Sydney fell by around one percent by midday on Wednesday.
BHP, also known as the “Big Australian”, is becoming increasingly keen to develop new sources of copper.
This was one of the main reasons for the group’s ultimately failed takeover attempt against its competitor Anglo American at the beginning of this year.
– Clean copper –
Copper, an electrical conductor used in wiring, is considered the foundation of emerging clean energy industries.
It is a crucial component in the manufacture of solar panels, electric vehicles, wind turbines and rechargeable batteries.
The price of copper has risen by about 400 percent over the past quarter century, exceeding the $10,000 per tonne mark in April for the first time in two years.
Global demand is expected to grow by up to 2.5 percent per year.
The Escondida Mine, which means “hidden” in English, was named after the abundant ore deposits hidden deep beneath the barren surface of the Atacama Desert in northern Chile.
BHP, together with minority partners Rio Tinto and the Japanese company JECO Corp., owns almost 60 percent of the mine.
Chile accounts for about a quarter of the world’s copper, followed by Peru, China and the Democratic Republic of Congo.
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