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A new contract was agreed upon by 93 percent of workers at the world’s largest copper mine, which is operated by mining giant BHP Billiton.
Escondida will power on without any disruptions, with the union representing workers at the BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) mine signing a new agreement on Friday (August 17).
The new deal heads off fears of a strike similar to the one from last year, which crippled production at the world’s largest copper mine.
While news of the agreement made headlines last week, workers voted in the days following with a result now known to be 93-percent approval.
“We have managed to defend all our benefits and we have been able to move forward on the relevant issues that have long been postponed,” the union said in a statement.
Meanwhile, Reuters reported that BHP released a statement saying that the new agreement will ensure the mine stays sustainable.
The company had been on the edge of strike action after the union and its members rejected what it called its “final offer” of a US$27,000 signing bonus and a wage hike tied to inflation rates.
That offer was rejected by almost 84 percent of the 2,330 union members, with their representatives saying the only way forward was a better offer.
With the help of government mediation, that’s exactly what has happened, although the details of the new, accepted offer have yet to be revealed.
Another success story for productivity came out of Chile last week, with workers at the Caserones copper mine, majority owned by Japanese JX Nippon Mining (TSE:5020) and Mitsui Mining (TSE:8031), voting to accept a new contract there.
While not as huge as Escondida, the Caserones mine produced 122,800 tonnes of copper in 2017.
Strikes in Chile have been having an effect on copper prices, with FocusEconomics analysts noting in their August commodities report that the threat of work stoppages was putting upward pressure on the price of the red metal, with its value trending down overall thanks to trade war ructions.
The analysts explained that prices were dropping “largely on the back of escalating global trade tensions and growing concerns of an economic slowdown in China,” the world’s largest consumer of copper — a force that is seemingly having the most impact on its value as strike fears subside.
“At the beginning of August, the winds of a trade war started to blow again: On 1 August, US President Trump’s administration announced a proposed 25 percent tariff on US$200 billion worth of Chinese imports, up from the previously announced 10 percent, on the grounds of China imposing retaliatory tariffs on the US imports,” says the report.
“Meanwhile, in the face of elevated worries about slowing growth in China, data from the Chinese manufacturing sector showed the slowest rate of output expansion in eight months in July, largely due to lower export orders,” it continues.
“This, coupled with a well-supplied market, exerted strong downward pressure on copper prices at the beginning of August, likely to be sustained in the short term,” the report says.
Nevertheless, in the medium to long term, analysts expect copper prices to rise on solid global demand for copper use in both traditional industries and new technologies.
According to analysts polled by FocusEconomics, copper prices will average US$6,837 a tonne in Q4 of this year, up to US$7,043 by the same time in 2019. Economists have adopted a wait-and-see approach for copper values.
The minimum forecast for Q4 2018 is from the Australian government’s office of the chief economist, which is calling for a price of US$5,788, while the maximum forecast comes from Germany’s DZ Bank, which sees prices reaching US$7,600.
On the London Metal Exchange, copper was trading at US$5,842, touching a new low. Copper has now lost 18.64 percent of its value in 2018, after starting the year at US$7,180.50.
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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.
