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Copper Drops in London on Speculation Chile Strike May End

Aug. 17 (Bloomberg) -- Copper fell for the first day in four in London on speculation a strike at the world's biggest copper mine may soon be resolved.

The union at Chile's Escondida yesterday lowered its request for a wage increase to 10 percentage points above inflation from 13 points, which helped to stoke speculation the two sides were nearing a settlement. The union will meet with management again today at 10 a.m. New York time to continue discussions.

``The market seems to be entirely hooked up on the Escondida situation with the talks,'' said Herwig Schmidt, a London-based trader at Triland Metals Ltd., who added that traders expect ``an agreement hammered out by the weekend.''

Copper for delivery in three months on the London Metal Exchange declined $100, or 1.3 percent, to $7,600 a metric ton as of 10:32 a.m. in London.

Escondida last year produced 8.5 percent of the copper from mines worldwide and 24 percent of output from Chile, the world's largest supplier of the metal. The strike, which began on Aug. 7, has cut processing capacity by about half and is costing as much as $16 million a day in lost profit on average, the mine's management told Chilean securities regulators yesterday.

Management has offered to increase salaries by 3 points above inflation, which was 3.8 percent annually in July, and pay a bonus of 8.5 million pesos ($15,934) a worker. Escondida's Workers' Union No. 1 also wants a bonus of 16 million pesos.

BHP Billiton is willing to reallocate funds within its salary package proposal, though it won't increase the value of the package, Mauro Valdes, a spokesman for BHP Billiton in Santiago, said yesterday.

Very Stubborn

``The company is being very stubborn,'' union spokesman Pedro Marin said. ``They keep saying there is no more money.''

Copper stockpiles are rising, helping damp prices for the metal used in construction and autos. LME-monitored inventory gained 1,950 metric tons, or 1.7 percent, to 115,675 tons today, taking this year's gain to 29 percent.

``The supply situation looks easier'' than in the last few months, said Andrew Silver, a trader at London-based Natexis Metals, one of 11 companies that trade on the floor of the LME.

Also on the LME, nickel dropped $900 to $28,200 a metric ton, aluminum dropped $19 to $2,482, zinc fell $45 to $3,355. Tin was $35 higher at $8,500.