Chuquicamata Strike In Day Two But Copper Market Focused On Trade War
(Kitco News) - A two-day-old strike at Codelco’s Chuquicamata copper mine in northern Chile, along with the potential for walkouts at other major mines, are not having a significant impact on copper prices as traders worry more about the potential loss of demand amid global trade tensions.
Codelco is Chile’s state-run copper company. Workers walked off the job at Chuquicamata on Monday and blocked access to the mine, according to news reports.
The Chuquicamata strike is not expected to last more than a few days or weeks, said Robin Bhar, metals analyst with Societe Generale. For one thing, he said, striking workers do not have as much leverage as in the past when copper prices were much higher.
Further, the strike is not the primary focus of the copper market at the moment, thus is doing little to underpin prices, analysts said. Trade tensions remain the critical factor affecting copper prices, Bhar said, although he noted that Chuquicamata produced some 500,000 tonnes of copper last year.
“There are fears of a global slowdown and China specifically on back of trade tensions,” Bhar said. “Therefore, any strike is not likely to have an impact. You’re not worried about supply if demand is going lower anyway.”
Comex September copper actually lost a penny a pound on Monday, the day the strike began. As of 11:09 a.m. EDT Tuesday, the contract was up just 2.05 cents to $2.8120. Previously, September copper fell from a peak of $3.3345 in early June to a low this month of $2.6735.
“There are other significant [potential] supply disruptions on the horizon,” said Daniel Ghali, commodity strategist with TD Securities.
In addition to Chuquicamata, workers at BHP’s Escondida copper mine in Chile – the largest in the world -- may also go on strike. Reuters quoted a union official as saying workers are expected to reject the company’s final contract offer in a vote this week. There is also labor unrest at Chile’s El Teniente mine.
Collectively, these three mines account for some 10% of the global output, Ghali said. Still, he continued, the metal has been influenced by weakness in China’s currency on worries that a trade war will destroy demand for the industrial metal. China is the world’s largest copper-consuming nation.
However, Ghali added, the copper-supply story also may be getting “overlooked” in the current market environment. “Escondida can be a catalyst for a reversal here.”