Copper forecasters are reassessing their projections as the top-producing country prepares for its busiest year ever for wage talks just as a new labor code comes into effect and higher prices inflate pay expectations.
Chilean mines will negotiate contracts with 32 unions next year, representing about three-quarters of the country’s copper output, or about one-fifth of world production. Globally, labor negotiations could trigger disruptions at mines producing about 40 percent of supply, according to Barclays Plc, which this week raised its price estimate.
While prospects of slower Chinese demand growth have sent copper back below $7,000 a metric ton in the past few weeks, supply is also constrained after years of cutbacks spurred by low prices.
That means any disruptions resulting from strikes could quickly tighten up the market — as happened this year with stoppages at Escondida in Chile and Grasberg in Indonesia. If that happens, prices could go back above $7,000 in the first half of the year, Bank of America Corp. analysts said last week.
“It’s going to be pretty tough,” Andrew Cosgrove, senior energy and mining analyst at Bloomberg Intelligence, said by telephone. “Copper price risks mainly come from the Chinese property sector, but the Chilean negotiations add a thicker layer of price support.”
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