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A labor dispute has erupted at the globe’s premier copper mine in Chile, as negotiations between workers and Australian mining giant BHP have reached an impasse. This development has sent shockwaves through the copper market, leaving investors and analysts on edge.
Nestled in northern Chile, the Escondida mine is a copper behemoth, unearthing a staggering five percent of the world’s supply annually. This precious metal is the unsung hero of modern life, powering everything from the humble electrical wire to the mighty rechargeable battery.
According to analysts, the current copper surplus should cushion the initial blow of the strike, but a prolonged production slowdown of more than a week or two could start to expose the market’s vulnerability, potentially triggering a supply squeeze.
BHP, the Australian conglomerate holding a majority stake in the sprawling mine, has activated contingency plans, ensuring that scaled-back operations will continue uninterrupted, courtesy of its non-union workforce.
In 2017, a protracted 44-day strike at the Escondida mine resulted in a complete production shutdown, costing BHP a staggering $740 million and contributing to a 1.3% decline in Chile’s annual economic growth.
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Encouraged by surging global prices earlier this year, union representatives have sought a bigger slice of profits for the 2,400 workers they reportedly represent at Escondida.
The union said it launched a “legal strike” over unmet demands that included bigger bonuses, shorter work days, and compensation tied to total years worked at the mine.
Media reports in Chile said BHP had offered a one-off bonus of nearly $29,000, lower than the $36,000 demanded.
The buoyant copper prices seen in May this year have sagged in recent months, with significant stockpiles of refined metal building in the depots of China and elsewhere.
“Total stocks at warehouses monitored by the exchanges in London and Shanghai have risen to levels not seen since the depth of the pandemic back in early 2020,” said Saxo Markets commodity analyst Ole Hansen in a recent research note.
“Instead, we have seen inventories monitored by the major futures exchanges continuing to rise at a rapid pace, signalling a period of a major supply/demand mismatch, primarily due to weak demand.”
BHP’s share price in Sydney dropped by around one percent by noon on Wednesday.
Nicknamed the “Big Australian”, BHP has been increasingly eager to snap up new sources of copper.
