Copper has continued its march upwards, reaching US$3.26 per pound on Wednesday (June 6), eclipsing last month’s high of US$3.14 per pound.
Fears over supply appear to be behind the rise in value for the red metal, with concerns emerging about Chile’s Escondida mine and the possibility of another strike following last year’s 44-day disruption, which saw Q1 2017 production down 63 percent.
Another round of negotiations on wages began last week, with the main union presenting new contract demands at the BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BHP) facility, which is the world’s top copper mine.
According to the Financial Times, the union, which represents 2,500 workers at Escondida, is demanding a signing bonus of US$34,000 per worker — 4 percent of the dividends paid to Escondida shareholders BHP and Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO) last year.
In a self-fulfilling prophecy, the union is also demanding a 5-percent wage hike due to rising copper prices.
Escondida’s output clocks in at 1 million tonnes of copper per year — a number almost double that of the second-place Grasberg mine in Indonesia operated by Freeport-McMoRan (NYSE:FCX).
Alone, Escondida supplies 5 percent of the world’s copper, but declining grades and diminishing reserves are causing BHP to seek higher productivity with lower costs, which is fodder for unions.
BHP is the majority owner of the mine at 57.5 percent, and has sunk nearly US$8 billion into it in order to maintain output through upgrades and expansion projects.
The current contract with the union was extended to the end of July this year in a deal that broke the last strike. If BHP gives too cool a reception to the latest demands, August could begin with tools down. The mining giant has 10 days to respond to the demands.
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