Chile workers at world’s biggest copper mine vote to strike

Workers at BHP’s La Escondida copper mine in Chile have voted to strike, threatening disruption to supply of the key metal.

BHP’s Escondida copper mine in northern Chile. Picture: Reuters

The union representing workers at Chile’s La Escondida copper mine said its members voted to reject the most recent contract offer from the mine’s owner and go on strike, potentially risking disruptions to the supply of a key metal as the world’s economy continues to recover from the impact of the coronavirus pandemic.

BHP Group-controlled Minera Escondida, located in Chile’s northern Atacama Desert, is the world’s largest copper mine, producing almost 5 per cent of the world’s supply of the metal, which is used to make electrical wiring and motors and in construction, among many other applications.

By law the miners must continue to work during a period of obligatory mediation by the government for a period of up to 10 days, so a strike isn’t a done deal, according to some analysts. Voting to authorise a strike is often seen across industries as a negotiating tactic.

“Any significant impact on the market and thus prices will depend on whether there is a walkout in 10 days or not,” said Eleni Joannides, an analyst at Wood Mackenzie, a commodities consulting firm, ahead of the vote. Although, “at current prices, Escondida negotiations appear to be built into the market.”

Still, when Escondida workers walked off the job in 2017, they didn’t return for 44 days.

(Striking miners at Escondida in 2017. Picture: AFP

The union said the contract offer contained no advances in the union’s request for a one-time bonus for workers for keeping the mine operating during the pandemic, along with performance-linked compensation, an improved career-development program and for the children of workers to have the same educational benefits as the children of supervisors.

The union vote was overwhelmingly against the mine owner’s offer, with 2,164 miners rejecting it and only 11 in favour, the No. 1 Union of Minera Escondida Workers said Saturday night in a statement.

The contract offered by Minera Escondida in its latest offer to miners “is really based on the extension of working hours, in the increase of operational demands,” and other conditions that are worse for workers, the statement said.

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

BHP manages the operation and holds a roughly 58 per cent stake. Other investors include Rio Tinto and Japan’s Mitsubishi Corp.

“The offer proposed by the company improves current conditions and incorporates new benefits in matters highly valued by workers,” a BHP spokesman said in an emailed statement on Friday.

After the union released the result of the vote, BHP said it would request an obligatory mediation process.

“The company’s interest is always to reach agreements with its workers, which is why we remain open to dialogue and to seizing all available spaces for this purpose,” the company’s statement said. BHP didn’t comment on the union’s specific requests.

The mining operation is already facing challenges from the Covid-19 pandemic. BHP has been running its Chilean copper mines, including Escondida, with a thinned workforce because of measures to prevent the spread of Covid-19, the miner said on July 20, as it reported a 10 per cent fall in fiscal-year copper output at the Escondida operation. BHP expects to face ongoing operating challenges in Chile because of Covid-19 infection rates, it said at that time.

Copper prices surged to a record high earlier this year on expectations of a continued global economic recovery and a mushrooming energy transition that will require lots of copper for electric vehicles and renewable power.

While some analysts, including Ms Joannides, think expectations of a disruption to the mine are already reflected by a recent jump in prices, others say a strike could help drive prices for the metal, used in everything from cars to air conditioners, to a record high.

The London Metal Exchange copper price this week climbed to a six-week peak and edged closer to its May all-time high. Morgan Stanley said the contract negotiations are a key focus for the short-term copper outlook. While the bank tips a surplus of copper in 2022, as production increases outstrip demand, the global market is experiencing a shortfall of the metal this year, it said.

Sabrin Chowdhury, a Singapore-based analyst at Fitch Solutions, said the Escondida risk is contributing to a bullish near-term outlook for copper, which is also benefiting from severe flooding in central China and a weaker dollar. China released a smaller volume of state reserves than the market had anticipated, too, she said.

“Whether the strike happens or not, it is leading to investor panic as copper inventories at exchanges have plummeted in recent weeks,” said Ms. Chowdhury. “The market is already tight with demand outstripping supply that is struggling to return to pre-Covid levels. If the strike actually happens, copper will reach a new record high, higher than what was seen in May.”

Wall Street Journal