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Mining unions strike while metals are hot Add to ...

Emboldened by high profits at mining companies, trade unions demanding higher wages are stretching industrial relations to the breaking point.

The highest-profile strike is at Escondida in Chile, the world's biggest copper mine, where workers downed tools on Monday when the mine's owners, BHP Billiton Ltd. and Rio Tinto PLC, refused to meet wage demands.

Escondida workers say their fight for higher wages is a fight for all unions.

Pedro Marin is Escondida union secretary. His family has been in mining in Chile since the days of nitrate mines in the 1800s. He said nothing has changed since then, when foreign companies came in and exploited local labour to enrich themselves.

"This is not just about us [at Escondida] it's about all Chilean miners," he said. "We will give an example for all the other unions to follow."

Strong words, but it's not just Chile where unions have become more militant.

"The worker's slice of the pie has generally diminished over the last decade. But they are coming back. It's always best to negotiate when the industry is doing well," said John Duray, who works in collective bargaining for USW.

"When an employer reports record profits for four or five consecutive quarters and comes to the bargaining table saying, 'You guys have to sacrifice,' it will not get a good reception."

It's only natural that unions should try to take advantage of high profits, said Alex Wood, mining analyst at Evolution Securities in London. "Escondida accounted for 15 per cent of BHP's [earnings before interest, taxes and depreciation]in 2005 and that could be closer to 20 per cent for 2006, and as BHP is delivering huge profit it's only natural that the union would want to ask for wage increases.

"Unionism has been part of mining through the ages, but in strong commodity markets it's natural to see the activity levels rise somewhat," he said.

By gunning for big gains when the times are good, unions may be storing up problems for when the downturn hits.

"Unions are always more successful, and tend to experience membership growth, in periods of economic growth, said Sarah Ashwin, an industrial relations specialist at the London School of Economics. "They are often more militant in these periods, too, but militancy is also a feature of the beginning of a downturn when they try to defend their gains," she said.

If industrial relations are good, then unions will usually modify their wage demands in the interests of continued good relations, and in the expectation that management will return this moderation when growth slows, she argued, but in a more fractious environment this may not happen.

"The results can be damaging -- meanwhile they [unions]are likely to get harder hit by governments or employers during the downturn."

Right now, unions playing hardball isn't all bad news for mining companies.

If strikes hit production and reduce the amount of metal in the supply chain, not only does it support prices, but it also gives miners an advantage in their talks with companies that turn mined output into finished metal. The less raw material there is, the less miners pay smelters to process it.

"I think the issues at Escondida will come to a sensible resolution in the next week or two," Evolution's Mr. Wood said.

"But in the meantime it's not a bad position for BHP's negotiators in Asia, currently deliberating on treatment and refining charges with local smelters, to be able to point to a very tight concentrates market."

*****

Down tools

Other recent work stoppages in the metals industry

Workers walked off the job at Inco Ltd.'s Voisey's Bay nickel mine in late July, shutting the pit in Labrador.

Century Aluminum in the United States shut part of its Ravenswood plant in July for fear of a walkout after the United Steelworkers union (USW) issued a strike notice.

Two of Grupo Mexico's mines have been shut by strikes this year.

On Monday, workers at Kumba Resources, the biggest iron-ore miner in South Africa, ended the first strike at the company in 19 years.

Reuters New Agency

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