SANTIAGO/NEW YORK - A workers' strike at Chile's Collahuasi mine may start curbing output at the world's No. 3 copper mine after a week as the stoppage eats up stocks built up to honor contracts, industry sources said on Friday.
Hundreds of union workers downed tools early on Friday to start a stoppage over pay after government-mediated talks failed.
Owners Xstrata and Anglo American said they were able to maintain output at the deposit, which produces 535,000 tonnes of copper per year or 3.3 percent of the world's mined copper.
Collahuasi has a plan to offset the impact of the stoppage that includes hiring replacement workers, the mine operator's spokeswoman Bernardita Fernandez told Reuters. However, she did not say for how long the plan can prevent output losses.
Mining companies usually stock up on copper at ports to comply with sales during strikes. Mineral inventories are also kept at the deposit to continue with its processing that requires less workers.
"Companies in Chile are increasingly more prepared to face strikes," said Pedro Marin, a union leader who led a 26-day strike at the world's top copper mine, Escondida, in 2006. "Usually output starts to decline after five days and shipments could be in jeopardy after a couple of weeks."
A union strike that lasted four days in 2007 did not hurt output at the mine, said a former negotiator for Collahuasi.
Fears of disruption at Collahuasi helped copper prices in London surge to near record highs on Friday as the market expects demand to outstrip supply next year.
Union leaders have threatened a long strike to secure more benefits, accusing mine owners of not sharing record profits with workers.
Past stoppages suggest that labor action at large mines are usually short-lived in Chile where only two of eight major strikes have lasted longer than two weeks in the past decade.
"I think beyond a week, it starts to become a concern," said a New York-based analyst who asked not to be named due to his firm ownership equity.
"We're looking at 10 000 tonnes of reduced production if this goes on for more than one week. For the month of October, copper in London Metal Exchange (LME) inventories has gone down by 6 000 tonnes, so in one week we would easily lose more than that from this strike."
Copper stock levels at LME are used a measurement of the market's appetite for the the red metal used to built electricity cables, cars and homes.
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