The Other Side of Low Copper Prices: How the Market Affects Mineworkers

The red metal is commonly referred to as Dr. Copper, and most are aware of how closely it’s tied to the economy. However, copper also affects the economy in another, less-talked-about way — it creates jobs for miners in countries around the world, and with lower copper prices, jobs in some of those areas might be at risk.

To be sure, low commodities prices have brought rampant layoffs for iron ore and coal miners in recent years. Some recent examples include Corsa Coal’s (TSXV:CSO) January announcement that it plans to cut 130 full time jobs from its Northern Appalachian operations and Rio Tinto’s (NYSE:RIO,ASX:RIO,LSE:RIO) plans to cut hundreds of jobs from its coal and iron ore operations in Australia.

Sadly, that narrative applies to copper too. In a recent piece for NPR, Carrie Jung describes how workers at Asarco’s Ray mine in Arizona are dealing with the threat of layoffs due to low copper prices. The company has said it has to cut jobs due to lower copper prices, and elected officials in small, nearby mining towns are estimating that the number of layoffs could reach 130.

Asarco isn’t the only miner cutting jobs. Reuters reported that Chile’s Escondida mine has started a “voluntary redundancy program” for its workforce, offering redundancy payments and other benefits, and The Globe and Mail wrote that lower commodities prices have taken a toll on employment in Western Canada, citing Taseko’s (TSX:TKO) decision to layoff 7 percent of the 700-person workforce at its Gibraltar mine this January.

Sam Hosler, mayor of the small town of Kearny near the Ray mine, told Jung that this sort of scenario is natural over the long term — commodities prices are cyclical after all. However, he also said that it never gets any easier for the communities that depend on mines, especially for younger families. “It still hurts,” he added.

Currently, copper prices are sitting at about $2.62 per pound, and with reports of slowing demand from China, things don’t appear to be looking up in the near term.

The cycle continues

Still, firms such as Dundee Securities and Macquarie Capital Markets have come out with positive predictions for the copper price a little further into the future. Dundee sees prices moving higher by the second half of 2015, while Macquarie anticipates supply disruptions speeding up the move from surplus to deficit for the red metal, which could be positive for prices. Notably, BHP Billiton’s (NYSE:BHP,ASX:BHP,LSE:BLT) Olympic Dam operations in Australia are set to lose 60,000 to 70,000 tonnes of output this year due to issues at the largest mill there.

And in the next few years, other miners are set to bring projects online that will add jobs to local communities. Nevada Copper‘s (TSX:NCU) Pumpkin Hollow project has received plenty of support at the county, state and federal levels of government, and also from the public, mainly due to the jobs it expects to create at the mine. Similarly, while there’s been some opposition to Tintina Resources’ (TSXV:TAU) Black Butte project over concerns about acid drainage, supporters of the mine have said that it could be developed without problems and would create well-paying jobs, according to the Great Falls Tribune.

On a bigger scale, as Jung notes, the potentially massive Resolution copper mine in Arizona, owned by Rio Tinto and BHP, stands to create about 3,700 direct and indirect jobs once built. Certainly, Hosler’s comment about the long-term cycle of mining and local communities appears to ring true.

Of course, for many mining projects — and in the case of Resolution in particular — there’s more to the picture than just job creation. In the comment section of Jung’s article, readers have pointed out that there have been concerns over the ownership of Native American land with regards to the Resolution project.

Overall, it’s a complicated relationship, but it’s definitely worth thinking about the people who make mines work and how changes in the trade winds affect their daily lives.

For now, mineworkers at Asarco and at other projects around the world will be waiting for the cycle to turn again. To be sure, while investors and market watchers might balk at lower copper prices, taking a moment to think about those who are affected by the weak commodities market in a different way can provide a sobering change of perspective.

Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Nevada Copper is a client of the Investing News Network. This article is not paid-for content.

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