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Copper jumped 3.7% in New York on Tuesday to trade at $3.25 a pound ($7,165 a tonne), the highest since end-February, as worries about supply disruptions in key producing region resurface.

Copper price soars to 3-month high

Workers at the Escondida copper mine in Chile put down quite a marker in the third round of contract negotiations with part-owner and operator BHP.

The union is demanding a one-time bonus equivalent to 4% of dividends distributed to BHP shareholders in 2017.

That works out to about $34,000 per worker. It would be the biggest bonus payout to mineworkers ever in Chile.

The union also wants a wage increase of 5%, which is more than double the inflation rate in the South American nation.

BHP has until next Friday to respond, but after two rounds of failed talks, the reception of the proposals is likely to be cool.

Due to its size, Escondida can on its own change global copper supply dynamics.

BHP, which owns 57.5% of the mine, has spent nearly $8 billion expanding the mine (including a $3.4bn water plant) in the past five years to maintain output above one million tonnes (2018 guidance is 1.18–1.23mt).

That means Escondida is responsible for nearly 5% of the world’s primary copper supply.

Ahead of the copper industry’s annual gathering in Santiago in April, Colin Hamilton of BMO Capital Markets summed it up this way:

“Put in simple terms, at more than 300kt Escondida's planned output recovery in 2018 will be the second largest year on year gain by a single operation in recent copper history, after Las Bambas in 2016.

“To have such reliance on a single operation for copper supply growth, particularly one with a history of output hiccups, clearly comes with some risk.”

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MARKET SUMMARY

INDICES

Name Last Change
DOW 25822.30 0.25%
S&P 500 2753.17 0.75%
NASDAQ 7859.17 0.49%
TSX 16296.97 0.21%
TSX-V 691.96 0.00%

Resource Commodities

Name Last Change
Gold 1193.56 0.18%
Silver 14.73 0.27%
Copper 2.69 0.030
Platinum 796.50 0.000
Oil 67.35 1.37%
Natural Gas 2.98 1.31%
Uranium 26.08 0.19%
Zinc 1.08 0.00%

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