Striking workers at the world's largest copper mine in Chile rejected a revised pay offer from BHP Billiton, extending a two-week strike that has cut production by as much as 60 percent. Copper prices rose.
The world's biggest mining company is offering more pay and higher bonuses, BHP spokeswoman Alejandra Wood said from Santiago. The 2,052 workers in the mine's main labor union decided the offer wasn't enough at a meeting late yesterday, union spokesman Francisco Aedo said.
Prices of copper, used in wires and pipes, rose as much as 1.5 percent in London and have more than doubled in the past year as consumption soared in China, prompting unions to seek a larger share of mining companies' profits. BHP is expected to report record full-year earnings of US$10.7 billion tomorrow.
"The offer given to the workers by BHP is still on the cheap side given that BHP is going to report another very good profit this week," said Jonathan Barratt, head of foreign exchange and metals at Tricom Futures Pty. "They will be looking for a greater increase"
Copper for delivery in three months on the London Metal Exchange rose as much as US$110 a tonne to US$7,590. It traded at US$7,540 at 8:05am yesterday in London.
Mine executives said on Aug. 16 that the dispute was costing owners, including Melbourne-based BHP Billiton, London-based Rio Tinto Group and Tokyo-based Mitsubishi Corp US$16 million in profit a day.
Escondida accounted for 8.5 percent of all mined copper worldwide last year.
BHP may post a 67 percent gain in full-year profit this year, according to analysts surveyed by Bloomberg. Rio Tinto said on Aug. 3 that higher copper prices helped its first-half net income rise 75 percent to a record US$3.8 billion.
"The company has directed these talks poorly," said Pedro Marin, another union spokesman, in a phone interview from Antofagasta.
BHP raised its offer to an increase of 4 percentage points above inflation, 1 percentage point higher than previously, and a bonus of 9.5 million pesos (US$17,834) for a 36-month contract.
Provided workers sign a 48-month contract, BHP will increase pay a further 1.3 percent in the fourth year, and pay a total bonus of 13 million pesos.
The Escondida's Workers Union No. 1, which represents 94 percent of the mine's employees, is seeking a wage increase of 10 percentage points above inflation and a bonus of 16 million pesos per worker for a 36-month contract.
Chile's inflation rate was 3.8 percent last month.
The 4 percent offer wasn't large enough, Marin said. He added that the union was prepared to negotiate on its demand for a 10 percentage point increase above inflation. He also said the union wasn't willing to agree to a four-year contract.
BHP Billiton's spokeswoman Emma Meade declined to comment on the union's rejection.
Previous labor disputes at Chilean copper mines have been short lived. Contract employees at state-owned Codelco, the world's biggest copper producer, returned to work after a 17-day strike at El Teniente and Andina mines in January. Placer Dome Inc's 500 workers at the Zaldivar copper mine ended an eight-day strike in July last year after the company sweetened a wage offer.
"The strike looks like it's going to go on longer than people expected," said Ron Cameron, a resources analyst at Ord Minnett Ltd in Sydney.