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Workers of Chile's giant Chuquicamata copper mine gather in front of the main gate of the mine. (IVAN ALVARADO)
Workers of Chile's giant Chuquicamata copper mine gather in front of the main gate of the mine. (IVAN ALVARADO)

Strike starts at Chile's largest copper mine Add to ...

Workers at Chile's Chuquicamata, the world's second biggest copper complex, began a strike over pay early on Monday, hitting output from global No. 1 producer Codelco and boosting prices for the metal.

News of the strike, the first at Chuquicamata since 1996, came hours after employees at the Altonorte copper smelter said they were close to reaching a wage deal with owner Xstrata to end a near week-long strike that also fanned supply fears.

Codelco sources have estimated the Chuquicamata complex in far northern Chile, which includes the Chuquicamata and Mina Sur deposits and produces around 4 per cent of the world's mined copper, will lose up to 1,800 tonnes of copper output per day and cost the state around $8-million per day in lost revenue. Chuquicamata was expected to produce 565,000 tonnes of copper in 2009.

"Operations have stopped. There is no production," a Codelco official told Reuters, asking not to be named. Workers at the complex began their strike over pay at 0800 GMT.

The stoppage helped drive international copper prices higher, though a senior Codelco official said the state-owned giant has enough stocks to honour deliveries early this year. Copper for three-month delivery on the London Metal Exchange rose 2 per cent to $7,504 a tonne, a fresh 16-month high and adding to gains of around 140 per cent posted during 2009.

The stronger copper price, coupled with wider dollar weakness, lifted Chile's peso on Monday.

The main entrance to Chuquicamata remained quiet on Monday morning, with near-empty buses coming into the mine. Some subcontractor workers were seen entering the site to conduct maintenance work, but hundreds of union workers stayed home.

Strikes at Codelco have historically been short-lived and analysts expect the latest stoppage to be brief and cause little supply shortfall, albeit while supporting market sentiment. Local newspaper La Tercera quoted a Codelco official as saying the company could make a new offer to workers on Monday in a bid to halt the strike.

Unions said Codelco made a wage offer on Saturday in a bid to head off the strike, but they refused to study it because it was not a formal offer.

Codelco has said it was ready for the strike but has not specified how long its stocks will last.

The strike comes just as Codelco was set to break years of dwindling output, the firm does not face another round of major wage negotiations until later this year. Local experts say the strike does not have much backing around the country as most Chileans do not understand the Chuquicamata workers' position, because they are considered well paid. Workers only very narrowly voted to strike.

Codelco is also a key revenue earner for the state, so the government, which has relied heavily on windfall copper savings to fund fiscal stimulus to counter global financial crisis and Chile's first recession in a decade, will be keen to avoid a protracted disruption.

Last-ditch negotiations between Codelco and the unions failed over the weekend, when union leaders rejected an improved company offer. Workers argue that they should enjoy benefits similar to peers at private mine Escondida, the world's biggest copper mine, which is majority-owned by global diversified miner BHP Billiton.

Union leaders at the Altonorte smelter said late on Sunday workers could sign a deal with global miner Xstrata as early as Monday and possibly resume operations later the same day. An Xstrata spokeswoman in Chile said the company hoped to clinch a final deal on Monday.

The Altonorte complex produced 232,000 tonnes of copper anodes in 2008. Xstrata said the stoppage coincided with general maintenance at the plant, which lowered anode output to a minimum. Maintenance work, which is carried out every 2 1/2 years, is due to end on Jan. 20.

"We are close to signing a deal to end the strike," said Abdiel Sepulveda, head of Altonorte's union No. 1.

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