Labour negotiations between BHP and the mine Union failed to find an agreement, paving the way for a strike at Escondida, the world’s largest copper mine.

Early this month, 99.75% of Union members rejected a BHP collective agreement offer and voted in favour of a strike. The Union reiterated its demand for 1% of dividends to be distributed to workers and that shifts and benefits remain untouched. Under Chilean labour laws, either party can request up to five days of government-mediated negotiations to avoid a conflict. These negotiations failed and a strike appears most likely. On the final day of the talks, BHP offered a signing bonus of 27 million Chilean Pesos (US$29,000) per worker, as well as improvements in benefits. Workers had sought a bonus of more than 30 million pesos (US$32,000) and a profit share.

Escondida produced 1.1Mt of copper in 2023, equivalent to about 5% of the world's primary production. Strikes and labour unrests are recurrent in Latin America and the last strike at Escondida in 2017 lasted 44 days. Surprisingly, the market reaction has been muted, either because it believes that an agreement will be found shortly, or because a temporary shortfall of supply can be more than offset by the weakness of current Chinese demand. However, the outcome will be watched closely by other mines in Chile, and one cannot rule out more strikes in the coming months. At Lundin’s Caserones copper mine, about 5% of the workforce went on strike Tuesday after the Union failed to reach a new collective agreement with the management.

Copper prices have lost all the gains they made in Q2 and are now back to their March 2024 levels. Chinese demand remains weak and the macroeconomic environment in Europe is subdued. However, low TC/RCs highlight the tightness of the concentrate market and copper prices can be very volatile. As such, a strike at the world’s largest copper mine cannot be completely dismissed.