BHP plans to request mediation from the Chilean government to prevent a strike at the Escondida mine, the world’s largest copper mine. The move comes after workers rejected BHP’s latest offer, which included “one-time bonuses,” extended workdays, and reduced benefits.
Union leaders are demanding that 1% of dividends be distributed equally among workers. They also want to keep existing shifts and benefits unchanged. Under Chilean labor laws, either party can request up to five days of government-mediated negotiations. These negotiations can be extended by another five days if both parties agree.
BHP expressed its intention to seek government mediation soon. The goal is to reach an agreement that meets workers’ expectations and ensures Escondida’s future sustainability. This comes as the mining company faces significant pressure due to high copper prices earlier this year, which raised employee expectations. However, the copper market has since cooled, with prices retreating from their record highs.
Earlier this year, strong copper prices boosted profits for mining companies like BHP. This surge in profits raised expectations among workers. However, the copper market’s recent downturn has led funds to cut their long positions on copper, affecting market dynamics.
The London Metal Exchange’s (LME) three-month copper price has dropped from a record high of $10,745 per ton in May to around $9,000 per ton. This price shift has impacted the overall sentiment in the market.Colin Hamilton, BMO’s head of Commodities Research, noted that any prolonged strike at Escondida could significantly impact copper treatment charges (TC) and refining charges (RC). These charges might remain close to zero during a prolonged outage. Hamilton also highlighted that a strike could jeopardize BHP’s plans to invest in a new concentrator at Escondida.
The last major strike at Escondida occurred in 2017. More than 2,300 union members participated in a 44-day strike, making it the longest private-sector mining strike in Chile’s history. This strike hurt production and drove up global copper prices. It is estimated that Escondida, responsible for about 5% of the world’s copper output, failed to produce over 120,000 tons of copper during that stoppage.
Escondida’s ownership structure is primarily dominated by BHP, with stakes also held by Rio Tinto and Japanese companies like Mitsubishi Corp. The mine’s importance is underlined by its contribution to global copper supply and Chile’s economy. Chile is the world’s largest copper producer, with copper sales accounting for about 60% of its export earnings. As the world’s largest copper mine, Escondida plays a crucial role in the global copper market, making any disruption significant.
