SANTIAGO, Chile (AP) — The world’s largest copper producer was shut down Monday in a 24-hour strike that is driving up prices on global markets and costing millions in losses for Chile’s state-owned mining company.
Codelco said it could lose $41 million from the company-wide strike, which came on the 40th anniversary of Chile’s nationalization of the mining industry, a move by socialist President Salvador Allende that was so popular that even his nemesis Gen. Augusto Pinochet didn’t dare undo it after seizing power in 1973.
The strike is adding to a tightening of world copper supplies. Together with an earlier strike in Chile and a strike at a large copper mine in Papua, New Guinea, it could cause a shortfall of more than 600,000 tons, driving December copper prices above $5 a pound, according to an estimate by metals analyst Shayne Heffernan of Heffernan Capital Management.
The immediate impact on prices Monday was negligible, however, with the economic woes of Europe’s major copper buyers driving down short-term demand, and copper for September delivery closed at $4.368 a pound today in New York, down 1 percent from Friday, after hitting a high for the year of $4.63 in February.
Chile has privatized many aspects of its copper industry in the decades since then and entered into huge joint ventures with companies from China and other countries, but Codelco remains state-owned and key to the nation’s future, providing 40 percent of government’s annual revenues.
It’s also under increasing pressure to modernize and attract outside investment so that it can develop and expand production.
Chile’s President Sebastian Pinera, the first elected center-right president in five decades, put in new management that wants to cut 2,600 jobs, reduce health benefits and attract private investment. But Chile’s center-left opposition is squarely backing the workers, fearing that more privatization moves could send Chile’s key copper revenues overseas.
Nearly 45,000 Codelco workers and contractors joined the strike, their largest in 28 years. Union leader Raimundo Espinoza claimed 100 percent participation and warned that they would extend it beyond Tuesday if a single worker is threatened.
Codelco CEO Diego Hernandez said closing the mines for even 24 hours would mean a loss of 4,990 tons of refined copper production. That comes on top of another $165 million Codelco lost recently due to strikes of contractors at El Teniente, the world’s largest underground mine.
Codelco plans to turn its open-air Chuquicamata mine to an underground operation, which will mean 2,600 fewer jobs by 2015. It also plans to outsource the company’s health care system, which the union fears will lead to reduced benefits, and encourage more workers to retire and join Chile’s public health care system.
Codelco produces 9 percent of the world’s copper, 1.7 million tons last year, and delivered $5.8 billion in revenue to the state in 2010.
Chileans love their copper company, so the pending changes pose a threat to Pinera, whose popularity has declined since he led the remarkable rescue of 33 trapped miners last year. More than 100,000 Chileans protested for free higher education in recent days, saying more copper revenues should be directed to improving schools and universities. Pinera’s popularity ratings have plummeted, with 60 percent of Chileans polled last week saying they don’t approve of his performance.
Associated Press Writer Michael Warren in Buenos Aires contributed to this story.