Mine disputes may prompt metal price spikes in 2010

http://www.reuters.com/article/idUSTRE60A2ZW20100111

By Karen Norton - Analysis

LONDON (Reuters) - Global prices for some metals may spike at times later this year if workers, in some cases emboldened by high prices and lucrative pay deals elsewhere, demand better packages and strike at key operations.

While 2010 is not a big year for major contract expiries -- the main indicator for potential labor disruptions -- there are still a few in copper, in top producer Chile toward the end of the year and before that in Canada, which may see a strike. There is also an important one in nickel later this month.

Platinum prices may also be boosted by possible industrial action in South Africa, the world's largest producer of the metal used by the car industry in catalytic converters.

Wildcat action may occur across the metals complex, but tends to be short lived and the impact on output minimal.

"Strikes in copper could lead to price spikes and the continued threat is another crutch for positive sentiment in the market," said Paul Robinson, group manager, non-ferrous metals at consultancy CRU Group.

"..In nickel it's also valid to say they (strikes) will be greeted positively for prices," said Andrew Keen, HSBC's head of metals and mining research, EMEA.

Sasha Naryshkine, an analyst at Vestact in South Africa, said producers of minerals there such as platinum were also likely to face a tough year from workers' unions demanding higher wages and industrial action could be inevitable.

"I would be more worried if people are unable to reach production targets for other reasons not necessarily labor because that of course you can catch up quickly," he added.

Labor disputes may not be the principal driver for metals markets this year, with demand from China seen as key in most cases. But they will give them a leg-up from time to time.

Strikes and work stoppage threats have buffeted Chile in recent months as workers sought a bigger slice of windfall profits with London Metal Exchange (LME) three-month copper prices not far off their all-time high of $8,940 a tonne.

No major copper contracts are due for renewal in Chile until later in the year. But things could get interesting before that. Xstrata's <XTA.L> copper refinery (CCR) in Montreal, which suffered a strike in 2007, will see a contract expire at the end of May. Analysts do not rule out action due to high prices.

The plant has a 370,000 tonnes per year capacity, although it has been operating at a reduced rate.

In Chile, the favorable terms reached at Escondida, the world's biggest copper mine, have raised expectations.

Pedro Marin, who heads Chile's Federation of Miners and the labor union at Escondida, said the wage deal won by workers at the mine marked a ceiling for future wage deals.

"If union leaders manage things properly, there shouldn't be any more problems with collective contracts (for the rest of the year)."

He said the main strike risk in wage negotiations was at Collahuasi, owned by Xstrata <XTA.L> and Anglo American <AAL.L>, where the contract expires on November 30.

Contracts expire on that date at three other Chilean operations, including Codelco's 300,000 tonnes per year Radomiro Tomic.

Elsewhere in the region, most of Mexico's miners under the national mining and metals workers union have been on strike at the country's largest copper mine Cananea, owned by Grupo Mexico <GMEXICOB.MX>.

XSTRATA SUDBURY

The state of individual markets could play a part in whether workers are likely to strike.

At the end of January the contract comes up for renewal at Xstrata's Sudbury nickel-copper operations in Canada and talks will be watched closely.

Nickel prices would rally, albeit temporarily, if workers take action. But some analysts feel a strike is unlikely.

"The union may well see that going on strike can be a lengthy and costly exercise with nickel prices not particularly high and more global diversified companies willing to suffer extended periods of closures at their operations," said BMO analyst Tony Robson.

Workers there have watched their Vale <VALE5.SA> counterparts suffer nearly half a year out of work, he said. There is no sign of the action at Vale's Sudbury and Voisey's Bay operations ending any time soon.

A strike-related upside price move in nickel is likely to be limited by poor demand from the key stainless steel industry and record high LME nickel stocks. Similarly, the expiry in May at major aluminum producer Alcoa's <AA.N> U.S. operations has prompted little concern.

Worker unrest may flare up outside formal labor talks in places such as Guinea, the biggest exporter of aluminum raw material bauxite and in other metals. But the impact on supply tends to be short-lived.

(Additional reporting by Mica Rosenberg in Mexico, Alonso Soto and Simon Gardner in Chile, Terry Wade in Peru, Reese Ewing in Brazil, Cameron French in Canada, Shapi Shacinda in South Africa and Daniel Magnowski in Senegal; editing by Sue Thomas)