BHP and Union No. 1, representing the workers of the Escondida copper mine in Chile, have reached a preliminary wage agreement, effectively ending a strike that began earlier this week. The agreement brings a halt to the work stoppage at the world’s largest copper mine, located in the Atacama Desert, which accounts for a significant portion of global copper production.
The strike, which started on Tuesday, was initiated by the union after the two sides failed to agree on a pay deal. The union, representing approximately 2,400 workers, had made a substantial demand: 1% of shareholder dividends from the mine, translating to roughly $35,000 per worker. This demand was a significant sticking point in negotiations, as BHP had offered a bonus of $28,900 before the strike commenced.
Negotiations intensified after the strike began, with both parties under pressure to reach an agreement that would prevent further disruptions at the mine. Escondida is a crucial player in the global copper market, producing over one million metric tonnes of copper annually, which accounts for about 5% of the world’s total mined copper.
On Friday, BHP announced that a collective contract proposal had been agreed upon, leading to the suspension of the strike. In a statement, BHP confirmed, “BHP and Union No. 1 have come to an agreement for a collective contract proposal. Along with that, it was agreed to suspend the strike underway as of this Friday, Aug. 16, at 8 a.m.” This resolution marks a significant moment in the ongoing labor relations at Escondida, which has seen its fair share of labor disputes in recent years.
The new deal, which could be officially signed as early as Sunday, is expected to address the concerns of the workers while allowing operations at the mine to resume normalcy. Union leadership is scheduled to meet with its members to discuss the details of the agreement before finalizing the contract.
The Escondida mine, which is partially owned by BHP, is vital to Chile’s economy and the global copper market. According to data from the Chilean Copper Commission (Cochilco), Escondida produced 614,400 tonnes of copper in the first half of 2024 alone. This production accounts for nearly a quarter of Chile’s total copper output during this period. Escondida’s contribution to Chile’s copper production is nearly on par with Codelco, the state-owned mining giant, which is recognized as the world’s largest copper producer.
Chile’s total copper production during the first six months of the year amounted to 2.6 million tonnes, highlighting the significance of Escondida’s output. The temporary halt in production due to the strike had raised concerns in the global copper market, where Chile plays a leading role.
As news of the agreement spread, copper prices responded on the Comex market in New York. Copper for delivery in September experienced a 1.2% decline, settling at $4.10 per pound ($9,020 per tonne) on Friday morning. Market analysts had anticipated this reaction, noting that strikes in Chile, particularly at major mines like Escondida, tend not to last long. Michael Widmer, head of metals research at Bank of America, commented on the situation, stating, “Strikes usually don’t tend to be long-lasting in Chile, and so the market may have been reluctant to react to it too much in the early stages.”
Despite the brief impact on copper prices, the more pressing concern in the market remains demand-side dynamics, which have been a focal point for traders and analysts alike. The swift resolution of the strike at Escondida is likely to alleviate some of the immediate concerns regarding supply disruptions.
The recent strike at Escondida was a reminder of the challenges the mining sector faces in maintaining labor relations while ensuring uninterrupted production. The last significant strike at the mine occurred in 2017, lasting 44 days, which had a far-reaching impact on both the mine’s production and global copper prices. That strike, which became the longest private-sector mining strike in Chile’s history, led to the loss of over 120,000 tonnes of copper production.
