By Ryan Dube 

Workers at BHP Billiton Ltd.'s majority-owned Minera Escondida copper mine in Chile went on strike Thursday, a union official said, putting pressure on the country's sluggish economy and copper prices over fears of shortages.

"People didn't show up to work," said Carlos Allendes, a spokesman for Escondida's largest union, Union No.1. "The strike has begun."

The strike at Escondida, the world's biggest copper mine, follows unsuccessful talks between the union and management for a new collective agreement.

Escondida, which accounts for about 5% of the metal's global output, said late Wednesday it would halt operations during the strike to ensure safety. It said the local labor regulator gave it permission to allow 80 employees to continue working to perform critical functions, including maintenance.

BHP, which operates and owns 58% of Escondida, said last month that the mine was expected to turn out 1.1 million tons of copper during the 12-month period that ends on June 30. Rio Tinto PLC and Japan's Mitsubishi Corp. have minority interest in Escondida.

The decision to walk off the job is raising concerns in Chile about the strike's impact on the economy, which was already posting weak growth. The economy expanded 1.2% in December, as mining activity contracted 3%, the central bank said Monday. Escondida accounts for about 19% of Chile's production of copper, the country's top export earner.

"Any additional impact that drags part of the small growth we are having is of course very significant and has the authorities very worried," said José Ramón Valente, the executive director of Santiago-based consultancy Econsult.

Mr. Valente said Chile's first-quarter economic figures will probably be "really bad" if the strike drags out. "I anticipate a tougher position from the company now than the one they had in the past, and that could lead to a longer conflict," he said.

Labor disputes have flared up in Chile's mining sector over the past year as worker demands conflict with company efforts to cut costs by reducing benefits and laying off employees due to low commodity prices.

Workers at Escondida, located in the northern Atacama desert, voted last week to go on strike after rejecting offers from the company for a new collective agreement that they said would reduce benefits. Their previous collective agreement expired on Jan. 31. The company asked the government to mediate talks this week to avert a strike, but no deal was reached as the union accused management of being rigid in negotiations.

Mr. Allendes, the union official, said the union currently doesn't have plans to restart negotiations.

Copper prices increased in the days leading up to the strike on concerns about the global supply of the metal. On Thursday, the three-month London Metal Exchange copper price was up 0.05% at $5,870.50 per metric ton.

Wage negotiations are planned this year at several other mines in Chile, raising the possibility of more disputes. Those mines account for about 12% of expected global copper production for 2017, according to Paul Benjamin, research director at consultancy Wood Mackenzie.

"There's a whole slew of other mines that have contracts due for renewal later on this year, so this could set the precedent," Mr. Benjamin said of the Escondida strike.

Workers at some operations have already reached deals. In December, about 2,100 workers at state-owned miner Codelco's Chuquicamata operation signed a 27-month labor agreement.

Escondida workers have walked off the job before, including a two-week strike in 2011 and a 25-day stoppage in 2006.

Write to Ryan Dube at ryan.dube@dowjones.com

 

(END) Dow Jones Newswires

February 09, 2017 10:37 ET (15:37 GMT)

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