Escondida copper strike drags on with little sign of resolution

Workers of the Escondida copper mine start an indefinite strike in Antofagasta, Chile, on February 9, 2017.
Juan Rivas | AFP | Getty Images

A strike that has shut down operations at northern Chilean copper mine Escondida, the world's biggest, entered its fifth day on Monday with few signs of an imminent resolution.

Workers began a strike at the BHP Billiton-run mine on Thursday to put pressure on the company after contractual wage talks failed to end in agreement.

The union has said its 2,500 members are committed to action and is threatening a two-month stoppage, leading BHP last week to swiftly declare force majeure, an admission that it will not be able to meet its contractual obligations.

In two months' time, a new Chilean labor law kicks in that may strengthen the union's hand.

On Sunday, BHP said installations had been attacked by hooded protesters.

Union spokesman Carlos Allendes on Monday called the company's statement a "distraction." The union said late on Sunday that it had acted within the law in its handling of the strike and facilities, and that a peaceful march without incident had taken place on Saturday.

"The situation is the same," said Allendes. "There has been no rapprochement."

Futures Now: Buy the copper rally?

Concerns about supply constraints have led the copper price to a 20-month high as Indonesia's Grasberg, the world's No. 2 copper mine, deals with an export ban, and Peru's important Las Bambas faces protests that have blocked roads.

That creates a dilemma for the government of Chile, where copper makes up more than half all exports and whose income has diminished in recent years as the metal's price has sunk.

A higher price will probably benefit the overall economy, although a protracted conflict will do little to encourage investment.

After 15 days of a strike, BHP may be able to bring in replacement workers. After 30 days, individual workers will have the option of accepting the company's offer.

Traders say it is difficult to see the path ahead.

"It remains to be seen how long the workers can maintain their tough position and if the market benefits from the price of copper and other metals to the extent that the cost of the strike is economically not such a bad thing," said one trader.

Escondida produced just over 1 million tonnes of copper in 2016 out of Chile's total 5.5 million.

BHP has a 57.5 percent controlling interest in the mine, with Rio Tinto and Japan's JECO also holding stakes.

Follow CNBC International on Twitter and Facebook.