Despite the pleas and overtures of the Chilean Government and the world's largest mining company, more than 2,000 union workers walked off the job at the world's largest copper mine in Chile Monday.

Because the copper pipeline is already stressed-and several other significant labour negotiations are on the horizon-copper markets and copper consumers will find themselves in a world of hurt if the Escondida strike doesn't end fast. Escondida produces 1/12 of the world's copper supply.

The strike was scheduled to begin at the start of the first shift on Monday, union Secretary Pedro Marin told Reuters over the weekend. "This will not end easily," he warned.

BHP Billiton spokeswoman Emma Meade told Bloomberg early Monday morning that the strike won't affect copper output initially as the mine will use stockpiles of ore to keep processing plants running.

The strike now puts pressure on an already tight and stressed copper pipeline, which was struggling to keep up with even short-term supply disruptions in smelting, shipping, mining production disasters and shortfalls, and labour disputes.

Escondida had offered workers a three-year contract last week with a 3% increase in salaries and bonuses worth about $15,000 per worker. The union wanted a 13% raise and a $30,000 net bonus per worker. Workers, who had already rejected Escondida's first offer of an 1.5% raise, a bonus, and low-interest loans of $8,500 per employee last week, didn't even bother to call a vote to reject the latest offer. Although the Chilean Government recently joined the two parties at the negotiating table, their efforts proved unsuccessful at averting the strike.

U.S. copper miner Phelps Dodge Senior Vice President Art Miele had recently warned that "even modest production shortfalls will have an immediate and significant impact on the (copper) market balance." International copper inventories throughout the production and copper chain are already very low, including copper exchange inventories which have less than one week of consumption remaining. Miele explained that with production facilities operating or near capacity, "it is not possible for mines or smelters to make up for lost production" to withstand strikes and other disruptions to copper supplies.

The even worse news is that during the second half of this year, several significant labour negotiations are taking place that involving copper companies including Canada's Highland Valley Copper mine in British Columbia in September, and several Codelco operations in Chile later this year. Grupo Mexico, the parent company of U.S. copper miner Asarco, already endured a strike last July at its Asarco mines and facilities. Meanwhile, Codelco is already trying to make repairs to a mine cave-in at its Chuiquicamata mining complex, which may cost it 960 tpd of copper.

Escondida produced 1.3 million tonnes of copper annually or 1/12 of the world's copper supply. The joint venture partner on the operation is Rio Tinto, whose Kennecott Copper mines include several major operations.

In his statements to Reuters, Marin vowed that the union would show its strength during the Escondida strike including holding protests that employ the noise tactics used by Chilean students in nationwide strikes last June which involved nearly 1 million protestors.
What this means to consumers

Copper is used in electrical, electronic, plumbing, and other applications, as well as transportation systems, housing, commercial construction and appliances. The average American home has at least 30 to 40 motors that rely on copper wires inside the motor, according to New York-based CPM metals analyst Jeffrey Christian. Copper is used in plumbing, automobile, trains and planes, and most other machinery that uses electricity or has water flowing through its engines.

End markets, such as construction, power generation, technology and secondarily telecomm spending, which impact copper usage could fall short.

As high metal prices have occurred during the past three years due to stronger consumer demand, institutional investors have plowed more funds in base metals mining, allowing for M&A, increasing exploration funding to seek new deposits to replace old mines, and permitting formerly marginal undeveloped copper properties to finally be developed as mines.