Market Speaks: Copper Rises Past $7k On LME Due to Mining Supply Fears

The price of copper rose above $ 7,000 a tonne on Tuesday on fears the giant Escondida mine in Chile could be hit by further industrial unrest. The main union at the BHP-operated mine fired the starting gun on the latest round of wage talks last week when they presented contract demands to management. They are demanding a signing bonus of around $ 34,000 per worker, or 4 per cent of the dividends paid by Escondida to its shareholders n++ BHP and Rio Tinto n++ in 2017. That would represent the biggest one off payment ever made by a Chilean mining company, according to local media reports.

On top of that, the union has also requested a 5 per cent increase in salaries, citing among other factors the increase in copper prices. The union represents around 2,500 workers at Escondida, which is the worlds biggest copper mine, accounting for around 5 per cent of global supply.

BHP now has 10 working days to respond to the offer, which analysts said was likely to receive a cool response. The Anglo-Australian miner has said that it must protect the competitiveness of Escondida not just in the short term but over the next five to 10 years and the decades to come. BHP has invested in around $ 8bn in the mine over the past five years to maintain annual output at more than 1m tonnes. To secure a return on that investment, BHP has said that it must raise productivity and cut costs at Escondida.

Most of the best metal has been extracted from mine, forcing BHP to mine low grade ore from two pits that are between 500 metres and 620 metres deep. The failure to reach a deal with the union last year led to a 44-day strike that rattled the global copper market. The union brought the dispute to end by invoking a legal provision that extended the current contract until July 2018.

If the two sides cant reach an agreement by the end of July and a period of mandatory mediation fails to produce a deal, another strike could start in August. In attempt to to reach a deal, BHP has said that it would provide the same health benefits to new and old workers. Copper for delivery in three months on the London Metal Exchange rose $ 60 to $ 7,074 a tonne on Tuesday.