BHP shuts biggest copper mine

LONDON: Copper prices bounced back in London on Friday after the world’s largest copper mine, BHP Billiton, said it was shutting as talks with striking workers collapsed. And nickel prices rallied towards this week’s record highs as market stocks came close to being exhausted.

Copper has recovered some Thursday’s more than 5% drop after BHP said it was closing its Escondida copper mine in Chile because workers had blocked access roads to the mine for two days and had put at risk the health and security of people working there. “We will not negotiate while the union carries out this illegal activity and will be taking legal action to resolve this,” a BHP Billiton spokesman said.

Escondida, source of 8% of the world’s copper, had been operating at around half speed due to the 12-day-old strike over pay and bonuses.

“There is a strong element of brinkmanship going on. I don’t know what BHP Billiton’s negotiating objectives are, but it seems it wants to transfer commodity price risk to the workforce,” an LME dealer said.

The union is holding out for a $30,000 special bonus for each worker and a pay rise of 10%, citing $2.9bn net profit at Escondida in the first half of the year. BHP has responded with an offer of 3% above inflation and a bonus of around $16,000.

In London, copper for delivery in three months ended at $7,450 a tonne, versus $7,290 at Thursday’s close.Nickel also rose after dropping more than 5% on Thursday. It traded $300 higher at $28,000, nearing Wednesday’s record $29,200 peak. It was supported by cash metal prices, which carried a premium of $4,000/5,000 a tonne above three months contracts.

On Friday LME-monitored nickel stocks rose 36 tonnes to 6,156, but the amount of nickel available to the market dropped to 870 tonnes, with the rest already earmarked for delivery. Global consumption is around 3,600 tonnes a day.

Barclays Capital analyst Kevin Norrish said: “The market is frighteningly tight. Stainless mills are probably short of material to meet their sales contracts. Nickel producers who have sold forward may not have enough metal to meet their obligations due to production slippages.

An LME spokesman said: “Stocks have never gone to zero. The fundamentals have kicked in to attract metal to warehouse. “Our first priority is to maintain an orderly market, which is why we acted on Wednesday. The market continues to be orderly and we have a number of mechanisms in place to ensure that continues,” he added.

He declined to comment on what specific actions the exchange could take if stocks fell further.Other metals followed copper and nickel higher.