Global Copper Ore Supply to Fall in 2017 on Salary Negotiation and Possible Strike, SMM Reports

SHANGHAI, Jan. 6 (SMM) - Recently, the market expects global copper ore supply to fall in 2017. More salary negotiations and strikes are likely in 2017 as many contracts between workers and copper mines will expire, SMM understands. This will bring more uncertainty on global copper ore supply.

The International Copper Study Group (ICSG) expects global copper ore output to be 19.90 million tonnes in 2017, flat at 2016’s.

2017 term TC/RCs of copper concentrate signed between Chinese copper smelters and overseas copper ore suppliers decreased, mainly because the growth of global copper ore supply was expected to fall in 2017.

Zambia’s Konkola Copper Mines’ (KCM) production was suspended due to an “illegal strike” at the copper mine and one of its copper processing plant by labor union workers January 4, one of the company’s speakers said. On the same day, a labor union leader of Chile’s Escondida copper mine, the largest copper mine in the world, said the mine may face a strike in February now that they failed to reach an agreement with workers on salary contract. BHP Billiton holds a 57.5% stake in the Escondida copper mine, and Rio Tinto holds about 30% stake.

In years past, strikes at mines happened and usually last for a few days, which had little effect on output. The Escondida copper mine also suffered from many strikes over the past few years. A strike in 2011 which lasted for 15 days reduced the mine’s copper ore output by 45,000 tonnes. Some of these strikes are as follows:

The one in July 2011 which was caused by salary issue lasted for 15 days and affected copper ore output by some 45,000 tonnes.

The one in August 2013, also caused by salary problem, lasted for one day, and gave limited effect on copper ore output.

The one in September 2014 due to salary problem lasted for 2 days, and gave limited effect on copper ore output.

The Escondida copper mine earned $4.88 billion in 2016 fiscal year, down sharply compared to $7.82 billion in the same period of 2015. So, it will be difficult for the mine to meet workers’ request, SMM said. Nonetheless, the mine’s managers have experience in negotiations with workers. So the likelihood that they will finally reach an agreement on salary contract issue is high, SMM added. If they fail to reach a deal, output will fall 3,000 tonnes each day by a possible strike.

Copper ore output at the Escondida mine totaled 745,000 tonnes as of late September 2016, according to official data. Annual output in 2016 will be 1.07 million tonnes, down slightly from 2015’s 1.13 million tonnes, due mainly to lower ore grade. 

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