The world's largest copper mine is threatened by a strike, a series of risks heighten concerns about copper supply

Copper prices have been further boosted by a possible labour strike at the world's largest copper mine in Chile, threatening already low global copper supplies.

As a result, the price of (LME) copper on the London Metal Exchange rose on Wednesday, climbing to $10015 a tonne at one point.

The union representing workers at the Escondida and Spence copper mines owned by BHP Billiton (BHP) rejected the company's contract offer and called on members to go on strike from Thursday. The crux of the negotiations is that workers demand to be seen as part of the production chain and are therefore eligible for output bonuses.

Escondida is the largest copper mine in the world, with production of 1.19 million tons in 2020, while Spence copper production was 146700 tons, accounting for about 24 percent of Chile's copper production of 5.7 million tons. Chile is the world's largest supplier of copper, accounting for 28.5%.

"if there is a strike at the Spence and Escondida copper mines, it will be a problem for the market," said Jonathan Barnes, a copper analyst at Roskill, a commodity supply chain intelligence firm.

Barnes noted that copper supply also faced a range of risks, including uncertainty over Chile's new constitution, Chilean mining royalties and a candidate who wanted to implement new mining taxes and royalties took the lead in Peruvian opinion polls.

"all this has led mining companies to be reluctant to invest because of uncertainty, and no major suppliers will respond when the world is in urgent need of copper," Barnes said.

The Chilean Congress passed a bill in March to raise taxes on copper, lithium and other miners. If the decree is formally issued, the tax on large producers will be raised from 3% to 10%.

"fundamentals remain underpinned by heightened concerns about copper supply disruptions in South America as a result of labour negotiations and elections." Said a copper analyst based in Singapore. Copper demand is still weak, but the premium may have hit bottom. The previous price decline has also stimulated end-users' interest in restocking. A strong futures premium is also good for traders' bulls and arbitrage strategies. "

In addition to lingering concerns about mining investment, the epidemic in Chile is still severe, with an average of about 6000 new confirmed cases a day, which also poses a potential threat to copper supply. The Ministry of Health announced on 26 April that the border closure would continue to be extended by 30 days to 30 May.

In addition, the dollar is still near a five-month low, making dollar-denominated metals cheaper for holders of other currencies, which could boost demand for copper.