CRU: Copper Price Volatility and Labour Negotiations

With 16 labour contracts still to be negotiated this year, concern over the possibility of a strike has persisted – albeit negotiations are running smoothly so far this year. This Insight explores how the market responds to labour negotiations and strike risks.

Negotiations pipeline

This year has already seen a large number of contract negotiations in the copper mining industry, with a large amount having reached agreements in early negotiation stages. However, there are still 16 contracts set to expire this year. If these negotiations follow the same trend observed in the first half of the year, the industry will avoid strike action, but there is still a chance that labour unrest will develop this year. Of the 16 labour contracts, 10 are in Chile, five in Peru, and one in the US. Most of the contracts expiring this year cover Codelco's operations (Andina, El Teniente, Caletones, Salvador, Mina Ministro Hales, and Gaby), and represent 45% of the production at risk listed in the table below. BHP contributes the largest share in terms of production with 46%. Escondida is up for negotiation this month and it is by far the most important in terms of production. Escondida's Union #1 has already announced it is requesting the equivalent of 4% of Escondida's 2017 dividends to be distributed as an end-of-conflict bonus. Escondida underwent a lengthy strike last year over labour contract negotiations.

Many of the labour negotiations reach a solution before the formal negotiation process starts. Even after this, many negotiations within the formal process reach a settlement. Some companies operating in Chile have a good track record in this, for example Antofagasta Minerals has not had strikes. Some negotiations however, reach deadlocks which have led to strikes in the past. A large fraction of these strikes last less than a week, but there are some which have lasted over a month.

Read the full story: https://www.crugroup.com/knowledge-and-insights/insights/2018/copper-price-volatility-and-labour-negotiations/

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SOURCE CRU