Copper prices dip as BHP closes in on a deal to avoid mass strikes at Chilean mega mine

BHP and union leaders in Chile reached a preliminary wage agreement on Friday at the world’s biggest copper mine, causing the commodity’s price to fall.

If ratified, the accord will end a stoppage that has disrupted production at a site accounting for about 5 per cent of the world’s mined copper at a time of tightness in the supply of concentrate — the raw material used to feed smelters.

Leaders of the main union at the Escondida operation agreed to temporarily lift a strike in order to present the new proposal to their 2,400 members, according to company and union statements. If they accept, the two sides will sign a new labor contract. If they don’t, the strike will resume on Monday evening Perth time.

Escondida churns out more than 1 million metric tons a year, making it by far the biggest supplier of copper. The preliminary accord will come as a relief given the mine has been the scene of lengthy stoppages in the past, including a 44-day strike in 2017.

Workers downed tools Tuesday after failing to reach a wage deal with management in the obligatory phase of collective bargaining. Since then, the two sides have been engaged in on-again, off-again discussions.

Negotiations dragged into the early hours of Friday in Chile before finally yielding a breakthrough. Terms weren’t made available, but an earlier proposal included an almost $US30,000 per worker signing bonus.

Supply risks at Escondida have supported copper futures in recent days, but a modest decline in prices after the wage deal signaled that investors have not been betting heavily on a protracted stoppage.

“Strikes usually don’t tend to be long-lasting in Chile, and so the market may have been reluctant to react to it too much in the early stages,” Michael Widmer, head of metals research at Bank of America, said.

“The bigger issue right now is how we’re doing on the demand side, and that’s probably why the market hasn’t focused on it so much.”

Copper prices fell as much as 1.1 per cent to $US9051 a ton on the London Metal Exchange after the announcement.

Copper is still on course for a weekly gain of more than 2 per cent, breaking a five-week run of losses. Resilient US data this week helped to allay fears about a downturn in the world’s top economy.