In a historic year for the price of the mineral, eventual supply cuts could drive prices up again, although the effect would be temporary, experts say.

Under pressure, the world copper market will begin to operate this week, after the Union No. 1 of Minera Escondida rejected the offer for $ 18 million in benefits proposed by the company controlled by BHP in the framework of its collective bargaining process, practically with 100% of the partners against the offer.

The importance of the site located in the Antofagasta Region mountain range is key for the world copper market, since a year it totals about 1.2 million tons of mineral, which represents up to 6% of what is consumes on the planet, according to figures from the Chilean Copper Commission (Cochilco).

This is why the outcome of the weekend’s vote is expected to increase pressure on the market. Although experts agree that there are several factors that influence the price of the mineral, what happens in Escondida plays a key role. “There may be even more pressure due to the fact that this happened over the weekend, and that it was added to that of Caserones and Andina, therefore, the market will find today Monday with three strikes voted, so we could see a impact, since when it happened on Saturday, the market did not have time to process it, so I would expect that at least the first hours of Monday there will be a reaction in the price, “says Juan Carlos Guajardo, executive director of Plusmining.

In its weekly report, Cochilco already warned of this situation, which together with the accommodative stance of the Federal Reserve on monetary policy indicated in the minutes of its last meeting – due to the low-than-expected growth recorded by the United States economy in the second quarter – is driving the price of copper. In the last week it appreciated 3.3%, ending on Friday at US $ 4.42 per pound.

“On the supply side, the risk of a strike at Minera Escondida is a factor that has also favored the price of the metal, considering that it is the largest copper deposit in the world,” said the state entity.

Along these lines, Gustavo Lagos, the Mining academic from the Catholic University, warns that this price increase is not a positive sign for the industry, nor for the country. “What increases the price does not compensate for what it loses with lower production in the event of a stoppage, so you do not have to take happy accounts in the face of a possible rise in prices. This is an indicator for the industry, so it is not good, because there is a rise in cost that also affects the Treasury ”, the expert assures.

The director of Estudio de Vantaz, Daniela Desormeaux, exemplifies with the rise in the price that was seen during the last stoppage in 2017, when the site had a 44-day strike. The expert adds that, in addition, the world copper supply is still under threat, and points out that a jump in value would be momentary if it occurs. “Demand continues to grow, but without the jumps that were seen post-pandemic, therefore there is a more balanced market. The fundamentals of copper continue to be positive in the long term due to the future uses of copper, however, in the short term we will continue to see volatility, on the one hand, due to the pandemic that is still not controlled ”, explains Desormeaux.

In any case, there are still stages left before BHP can stop the strike at the site. In fact, as soon as the results were known that showed 99.5% support for the strike, the company announced that they will request the mediation of the Labor Directorate, so as it transpired, the meetings between the mining company and the union leadership headed by the president of the organization, Patricio Tapia.

Source: El Mercurio