World’s Top Copper Mine Risks Slowdown From Strike In Chile

(Bloomberg) -- Supervisors at Chile's Escondida mine rejected the company's final wage offer, moving them a step closer to a strike that could slow output at the world's biggest copper operation.

About 98% of members of the No. 2 supervisors union approved a strike in voting finalized Wednesday, the union said. The BHP Group-owned mine has requested five days of mediation offered under local laws in a bid to avert the stoppage. Talks could then be extended for another five days if both parties agree.

While the mine probably could keep running during a stoppage by supervisors, the rate of production may slow, giving further support to copper prices that have rallied more than 40% from a March low. In July, Escondida produced about 100,000 tons, government data show.

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“If an agreement cannot be reached, and a strike were called, operations could continue -- but in situations where safety or forward planning became an issue, the mine would not be able to operate at full capacity,” RBC Capital Markets analyst Tyler Broda wrote.

The vote by Escondida supervisors comes just two days after workers at Lundin Mining Corp.'s Candelaria copper mine in Chile also rejected a final offer in regular wage talks. Unions at other Chilean mines that are scheduled to negotiate new contracts this year will be paying close attention to developments at Escondida and Candelaria.

Chilean copper mines have been able to maintain output during the pandemic by delaying non-essential activities and reducing on-site staffing. That's spurred concern by unions over job security, which may work in favor of companies in the wage talks.

Antofagasta Plc managed to avoid strikes in July after going through the mediation process. Lundin has also opted for mediation. A second union at Candelaria is scheduled to vote on whether to strike on Oct. 4-5.

READ MORE: Lundin Turns to Mediation in Bid to Avert Copper Strike in Chile

Escondida “is convinced that its latest offer is serious and presents improvements,” it said by email. “The company remains open to dialog and reaching an accord that is reflected in a mutually beneficial collective contract that addresses the short- and long-term challenges it faces as an organization.”

Benchmark copper futures traded up as much as 0.6% on the London Metal Exchange Thursday before retreating to be down 1.1% at 8:32 a.m. New York time. Financial markets in China are closed for a week-long holiday.

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