Mining’s Next Big Boom – by David Fickling (Bloomberg News – January 11, 2017)

Here’s something to give a fresh shot in the arm to copper, the second-best-performing base metal over the past three months: the prospect of strike action at its biggest pit.

Management at BHP Billiton Ltd.-run Escondida in Chile have rejected union demands for a 7 percent pay rise and 25 million peso ($37,300) bonus, and talks are ongoing ahead of a vote by workers on a final proposal Jan. 24, Bloomberg News reported Wednesday.

As Gadfly argued in September, the risk of industrial action is one of the major supply-side factors supporting copper at the moment. Escondida accounted for about 1.2 million metric tons of mined copper in 2015, so any stoppage could sharply tighten a market that Bloomberg Intelligence estimates will see a 453,000-ton surplus this year.

It’s worth stepping back, though, and considering that the more feisty attitude Chile’s copper miners have shown of late isn’t simply a spot of local trouble. Instead, it’s a symptom of factors that touch every corner of the commodity market, and ultimately play a part in rebalancing global prices.

Labor, quite as much as diesel oil, dump trucks and conveyor belts, is an essential input to any mining operation. When commodity prices rise, miners do their utmost to expand production as quickly as possible, creating more demand for workers and machinery, and driving up prices wherever supply is unable to respond quickly enough. When prices fall, employees, as much as machinery and fuel, are liable to get laid off.

When the mining boom was at its height, high-school dropouts were able to command $200,000-a-year pay packets — more than then-Federal Reserve Chairman Ben Bernanke — to work in Australian pits. Mining employment in the country nearly doubled over the five years to 2012.

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