ANALYSIS-South America labor strife could boost metals rally
Posted by Reuters News on 20 October 2009, 12:42 PM
communities.thomsonreuters.com
* Rise in metals prices stokes labor tension
* Labor strife could hurt output in Peru and Chile
* Supply fears could further lift prices of metals
By Alonso Soto
SANTIAGO, Oct 19 (Reuters) - Rising metal prices and an improved global economic outlook have stoked labor tensions across South American mines, threatening to exacerbate tight supplies and drive up prices further for minerals like copper.
The scenario has emboldened workers to demand wage hikes and more benefits from companies that cut hundreds of jobs and froze projects at the height of the economic crisis but now are set to profit from recovering metals prices.
Mine workers in mineral-rich Peru are staging a two-day strike. In Chile, the world's top copper producer, workers at one mid-sized mine have been off the job for seven days and contract talks at several other key mines are expected to be difficult and could lead to stoppages.
Contracts are up for renegotiation in 2009 and next year at mines representing about one quarter of Chile's annual copper output of 5.3 million tonnes.
Some Latin American countries appear to be turning a corner from the global recession, while metal prices have risen on prospects for a cyclical upturn.
Peru's two-day nationwide strike helped boost copper prices on Monday, and they touched a one-month high at $6,399 a tonne. Even though the strike was limited, sparing key copper and gold mines, the conflict with the government could herald future labor trouble in Peru.
The National Federation of Mine Workers staged the walkout in Peru to protest legislation limiting their benefits and also to protest the government's refusal to lower the retirement age for miners.
"Any strife would definitely spark concerns on the fundamental side," said Eugen Weinberg, the head of commodity research at Commerzbank AG. "If it becomes visible the market should react strongly to the risk."
Globally, Peru ranks as No. 1 in silver, No. 2 in zinc, No. 3 in copper and tin, No. 4 in lead and No. 6 in gold.
CHILE LABOR TENSIONS
In Chile, mining companies' profits are expected to rise in the third-quarter after negative results last year.
Last week workers at BHP Billiton's 168,000 ton-per-year Spence copper mine walked off the job over wage disagreements with the company, hurting output and helping lift copper prices slightly.
That same week BHP averted a strike at its Escondida copper mine, the world's biggest, after workers agreed to an offer that included $25,000 in bonuses and a 5 percent wage hike.
Experts say the deal raised the bar for other companies like state miner Codelco and could complicate future contract negotiations at enough operations to affect global supply.
"The conditions are just right for workers to demand more in negotiations," said Pedro Marin, head of Chile's Federation of Miners and union leader at Escondida. "Other miners should aspire for something similar to Escondida, but each negotiation is different."
Contracts at several key mines expire around the same time as Chile's presidential election in December, raising the risk that workers at state miner Codelco, who have generally been aligned with the long-ruling center-left coalition, would increase demands to weaken the center-right opposition.
Workers at Andina copper mine have already scrapped an early offer from Codelco, the biggest producer of the red metal, for a 3 percent salary hike and around $16,000 in bonuses and benefits.
Escondida "will raise the bar for collective negotiations," Mining Minister and Codelco board chief, Santiago Gonzalez, told La Segunda daily on Monday. "Bonuses for that amount had never been given in the history of Chile's mining industry."
Codelco is also scheduled to start wage talks at its massive Chuquicamata copper mine in December. Some union leaders at the mine have said the Escondida offer would be the starting point for negotiations.
(Reporting by Alonso Soto; Editing by Fiona Ortiz and David Gregorio) |
