Copper price: BHP plans for Escondida strike

Fears over the impact of a US trade war with China, responsible for half the world’s metal consumption, overshadowed news that workers at the world’s largest copper mine are planning to down tools for at least 30 days if part-owner operator BHP doesn’t agree to their demands.

BHP, the world’s fourth largest copper producer, said on Thursday it had begun to review contingency plans ahead of a possible strike at Escondida in Chile, responsible for nearly 5% of primary global copper supply.

Melbourne-based BHP said in a statement that the wage offer rejected earlier on Thursday by the union was the “best collective labor contract at a private mine in the country.”

The union responded by saying the company should improve the offer by Monday August 6 or it will start gearing up for a strike.

Yesterday union No. 1 President Patricio Tapia said in an interview with Bloomberg a strike at the mine won’t be a short one.

Workers plan to use a provision in Chile’s new labor code to retain benefits. After 30 days, some would return to work individually, effectively accepting the company’s last offer. Others would stay on strike, allowing the union to call for an 18-month extension of the previous contract.

Then the union representing all workers, including those who abandoned the strike, would negotiate using the previous contract and all of its benefits as the starting point.

“Our members would have the 1.5 percent increase in wages that the company is offering now,” Tapia said. “We keep our benefits intact and the company still has to pay; that’s our strategy.”

Chile’s labor authority questioned the strategy in a letter Tuesday, saying workers who abandon the strike individually would have to negotiate after 36 months and can’t be part of a collective negotiation.  The union remains confident the strategy is valid, Tapia said.

Management and workers could engage in five additional days of talks mediated by labor authorities, which could be extended for five more days. If no agreement is reached, a strike would start around mid-August.

The union is demanding a one-time bonus equivalent to 4% of dividends distributed to BHP shareholders in 2017 for a total of just under $4 billion (25.6B pesos). That works out to about $34,000 per worker and compares to the Anglo-Australian firms final offer of a bonus of nearly half that figure (13.5B pesos).

A 44-day strike in February-March last year crippled production at Escondida, which BHP expects will produce more than 1.2m tonnes in 2018.

Strike season

Upcoming contract negotiations could also lead to outages at Chile’s state-owned Codelco operations which include the Andina, El Teniente, Salvador, Ministro Hales and Gaby mines and the Caletones smelter.

Earlier this week workers at Chuquicamata, Codelco’s second largest mine with output of more than 330kt last year, downed tools and blocked access to the property over a dispute with management.

On Tuesday the main union at Chile’s Caserones mine expected to produce 110kt this year rejected operator Lumina Copper’s final wage offer.

Together with Escondida, the Chilean operations under threat of labour action have a capacity of 3m tonnes per year or nearly 15% annual global output.

(With Bloomberg)