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Threat of strikes looms large for copper supply in 2018 - Andy Home

Metal News - Published on Thu, 21 Dec 2017

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Daily Mail reported that unionised workers at the Quebrada Blanca copper mine in Chile walked off the job last week after failing to agree on a new labour contract. It's the third strike at a South American copper operation in almost as many weeks.

A three week strike at Southern Copper's Peruvian operations has just ended, while one of the unions at the giant Escondida mine in Chile held a one day "warning" strike on November 23.

None of this labour strife has had much discernible impact on the copper price.

That's partly because any bullish enthusiasm about fundamentals has been overwhelmed by a mass exodus of fund money over the last couple of weeks.

Funds have slashed their collective net long positioning on the COMEX copper contract from over 125,000 contracts at the start of September to a current 48,384.

And in part it's because in all three cases only one of several unions has been involved, allowing operators to minimise the impact on production.

However, it's an early sign of what is likely to be a defining feature of the market next year as an unusually high number of labour contracts come up for renewal.

According to analysts at Citi bank, there are over 30 labour contracts, covering around five million tonnes of mine supply, due to expire next year, most of them in Chile and Peru.

Analysts at Barclays Capital come up with even more contracts, 38, covering even more production, over seven million tonnes, by including a batch of contracts expiring this month.

The number of labour contracts due for renewal is the largest since 2010, according to Barclays.

The bank noted that "To give context, from 2011 to 2016, the average amount of supply at risk from contract renewal disputes averaged 1.69 million tonnes with an average of 12 contracts up for renewal.”

The list of potential disruptions ahead includes some of the world's largest copper mines.

Antamina and Cerro Verde in Peru, with output of 430,000 tonnes and 520,000 tonnes last year respectively, will see contracts expire in July and August.

In Chile, state-owned Codelco alone has 19 contracts up for renegotiation across its divisions, according to Barclays.

But looming largest of all is Escondida, where the deadline is the end of June.

Escondida experienced a 44-day strike in the first quarter of this year, cutting production by 214,000 tonnes, according to operator BHP Billiton.

This is the world's largest single mine and the walk-out depressed Chile's overall copper production profile.

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Posted By : Rabi Wangkhem on Thu, 21 Dec 2017
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