Strike like it’s 2011? Low copper prices loom large over wage talks – by Josephine Mason (Reuters U.S. – April 20, 2015)

SANTIAGO – (Reuters) – When Antofagasta Chief Executive Diego Hernandez took the stage at the world’s biggest copper conference last week, he talked about the growing risks mining companies face from rising worker salaries in South America due to staff shortages and strong unions.

What he didn’t mention at the CRU copper conference in Santiago was the far graver immediate labor threat that many of his rivals face: the biggest round of contract negotiations since 2011, and likely the most contentious in years as falling copper prices and deep cost cutting programs strain relations between workers and operators.

The copper market seems to be perilously indifferent to the threat posed by this year’s contract talks at mines including one of the world’s largest, Grasberg in Indonesia, and Antamina, Peru’s biggest, risking a bullish shock if workers move to strike, analysts said.

“I think people are assuming with the change in the market, it’s going to automatically mean unions will be more flexible.  But it could be a very tough situation,” Juan Carlos Guajardo, executive director of Santiago-based mining consulting firm Plusmining, said. Last year, Antofagasta agreed to four-year contracts, including pay increases and cash bonuses, at its mines across Chile.

But the outcome of talks at Antamina and Grasberg, where contracts expire in July and September, respectively, and worker unrest that has paralyzed production recently, may set the tone for the industry this year.

Antamina’s majority shareholders are Glencore and BHP Billiton, while Grasberg, which has been plagued by worker strife in recent years, is majority-owned by Freeport McMoRan Inc.

With just over two months before talks are likely to start, the union representing most of the 2,860 workers at Antamina says it won’t scale back its demands due to the fall in the copper price.

“There’s a tendency to dramatize by saying prices are low … But they (Antamina) are still profitable,” Jorge Juarez, the secretary general of the Sutracomasa trade union, told Reuters.

By historic standards, prices around $6,000 per tonne are not low, he said. Ten years ago, prices were around $3,500 per tonne.

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