Strike has erupted at the Escondida copper mine in Chile, the largest of its kind in the world, following a breakdown in wage negotiations between the workers and BHP, the multinational mining company that operates the mine. The strike began early Tuesday morning after both sides failed to reach an agreement despite government-mediated talks.
The strike involves 2,400 union members at the Escondida mine, a major global copper producer, responsible for around 5% of the world’s copper output. The walkout, which began at 8 a.m. local time, was announced by union leaders via an emailed statement. While the statement conveyed the union’s position, no formal announcement had been released by the company or the government at the time.
In their statement, union leaders expressed frustration, stating, “We’re convinced we made every responsible effort to reach an agreement, but that wasn’t possible.” This sentiment highlights the deep divide between the workers and BHP, despite the ongoing negotiations that continued late into the night on Monday.
The final round of mediated talks saw BHP representatives and union leaders meeting for one last attempt to resolve the dispute. BHP had presented an improved wage offer to the workers and the labor regulator, which included a $28,900 bonus for each worker. Despite this, the union rejected the offer, leading to the strike.
Tensions between the parties had escalated earlier on Monday when BHP accused union leaders of not attending scheduled negotiation sessions. The union, however, argued that BHP was fully aware they wouldn’t be attending those sessions and criticized the company for publicly revealing the terms of the offer without prior consultation with the union.
This strike is not the first time Escondida workers have downed tools over wage disputes. The last major strike at the mine occurred in 2017, lasting 44 days. That strike severely disrupted copper production, driving up global prices and becoming the longest private-sector mining strike in Chile’s history. During that period, Escondida failed to produce over 120,000 tonnes of copper, highlighting the potential impact of such work stoppages on the global copper market.
The financial implications of this current strike are substantial. Estimates from Goldman Sachs suggest that a 10-day strike could reduce BHP’s earnings by over $250 million, with losses projected at around $16 million per day. Should the strike extend to 44 days, similar to the 2017 stoppage, the impact on BHP’s earnings before interest, taxes, depreciation, and amortization (EBITDA) could reach as high as $795 million.
Escondida is an important asset for BHP, and its significance to Chile’s economy cannot be overstated. According to data from the Chilean Copper Commission (Cochilco), the mine accounted for 23.7% of the country’s copper production in the first half of the year. This is almost on par with the production levels of Codelco, Chile’s state-owned copper giant and the world’s largest copper producer.
In the first six months of 2024, Escondida produced 614,400 tonnes of copper, contributing significantly to Chile’s total production of 2.6 million tonnes during the same period. The mine’s output plays a crucial role in the global copper supply, and any disruption at Escondida has far-reaching consequences for the international market.
The strike at Escondida comes on the heels of another labor action at the Caserones copper mine, also in Chile, where 270 workers walked off the job just a day earlier. The Caserones mine is operated by Lundin Mining, a Canadian company, further illustrating the growing labor unrest within Chile’s critical copper industry.
BHP, which holds the majority stake and operates the Escondida mine, shares ownership with Rio Tinto and several Japanese companies, including Mitsubishi Corp. The mine is one of BHP’s most valuable assets, and the strike is likely to prompt significant concern among investors and industry stakeholders.
Chile is the world’s largest copper producer, and copper exports are vital to the nation’s economy, accounting for approximately 60% of its export earnings. The ongoing strike at Escondida could have severe implications not only for Chile’s economy but also for the global copper market, which relies heavily on stable output from the South American country.
