Copper’s Price Surge Won’t End Soon – by Shelley Goldberg (Bloomberg News – February 23, 2017)

When copper traders hear of an impending mining strike they typically “buy the rumor and sell the fact.” They get in the market and get out, knowing that strikes are often expected in any given year and typically settled, at which point prices and volatility fall back to pre-strike levels.

This was the case leading up to Feb. 9, when miners at Escondida Chile, the world’s largest copper producer, voted to strike after contractual wage talks failed to end in agreement. BHP Billiton Ltd., which holds a 57 percent stake in the mine, decided to stop production and swiftly declared a case of force majeure. That pushed copper to a 20-month high; and there could be room on the upside.

Copper, used for wiring and construction, is considered the bellwether of global market growth. BHP’s Escondida is in the copper-rich Antofagasta region of northern Chile. It produces approximately 5 percent of the world’s copper (1.43 million metric tons in the 12 months that ended Dec. 31), and supports more than 10,000 full-time jobs.

Miners accused BHP of withholding pay increases, seeking to cut bonuses, removing top-up payments for those who accept voluntary redundancy packages and changing shift hours. The company blames miners for causing damage to equipment and installations.

The strike is particularly relevant now because of its timing, external events and the U.S. political climate. Even as 2,500 striking workers have agreed to let the government mediate the conflict, there are no guarantees the dialogue will resume.

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