Copper: global supply at risk

A tightening global copper market is facing the real possibility of simultaneous disruptions at three mines in Chile, the top producer.

By far the most serious threat to global supplies comes from Escondida, the world’s largest copper mine, where workers rejected owner BHP Group’s latest wage offer in a vote last week. Unless the two sides can reach an agreement in government-mediated talks this week, the market could be left without production from a project that churned out 1.2 million tons last year.

Two other smaller mines, Codelco’s Andina and JX Nippon Mining & Metals’ Caserones. are in the same phase of collective bargaining. This puts more than 7% of world production at risk at a particularly sensitive time in the metal cycle and Chilean politics.

Labor tensions are intensifying just as trillions of dollars in government stimulus are fueling demand for industrial metals.

Chile is drafting a new constitution that could lead to stricter rules on water, glaciers, mineral and community rights, with presidential elections in November.

In last week’s vote, members rejected BHP’s proposal by an overwhelming 99.5 percent. Union leaders said the company is offering large one-time bonuses in exchange for longer hours and new demands in an effort to increase productivity and profits.

The union hopes this vote will wake BHP up to begin substantive discussions to reach satisfactory agreements to avoid a protracted conflict that could be the most costly in the country’s union history.