Prolonged Chile Strike Fans Copper Supply Worries

SANTIAGO, Oct. 21 -- Workers at Chile's Spence copper mine entered their eighth day of strike on Tuesday, which has hit output and fanned fears of supply disruptions in the world's top producer of the red metal.

    Copper rallied to its highest level in over a year on Tuesday due in part to growing optimism of a global economic recovery, a weak U.S. dollar and strike risks. Copper MCU3 on the London metals Exchange was at $6,485 a tonne at 1415 GMT.

    An upswing in the price of metals such as copper has raised the specter of labor unrest in mining powerhouses Peru and Chile, which could add to supply fears and raise the price of minerals.

    Higher prices have emboldened mine workers across South America to demand more of the industry's profits.

    In Peru, mine workers entered their second day of a nationwide walkout that proved to have limited support, but raised investors' concerns over mining operations in the world's No 3 copper producer.

    Chile's Spence union workers leader Andres Ramirez told Reuters workers planned to march later on Tuesday in the northern city of Calama to call owner BHP Billiton (BLT.L: Quote) (BHP.AX: Quote) "to negotiate with us."

    "We don't understand why the company does not want to negotiate with us," Ramirez said.

    A BHP spokesman in Chile said union officials have yet to contact the company to resume negotiations, but that "we hope that (talks) resume soon."

    He said the company demanded the union guarantee the security of the mine's installations and its employees after workers set up camp outside the mine last week. Earlier union workers said they don't plan to block access roads to the mine located in Chile's Atacama desert.

    BHP averted a strike at its Chile's 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.

    However, experts and mining executives say the generous deal raised the bar for other companies like state miner Codelco and could complicate future contract negotiations at enough operations in Chile to impact global supply.

    Executives of state miner Codelco, the world's biggest copper miner, cautioned workers to be prudent with their demands in contract talks scheduled for later this year.

    Codelco is scheduled to rework the contract of thousands of workers at its its Andina and Chuquicamata copper mines.

    Union workers at Andina told Reuters they are drafting their wage proposal and aim to start negotiations later this week after they rejected an early deal from Codelco.

    BHP earlier on Tuesday said production at the mine was lower, but declined to say by how much.

    Last year Spence produced 164,761 tonnes of copper cathodes.

    (Source: Reuters)