Strikes called at Southern Copper’s Peruvian operations

This week’s industrial action by miners at Southern Copper’s three Peruvian sites has caused a sharp rise in the copper price, which is at its highest level in nearly five months.

Southern Copper’s Cuajone and Toquepala mines, which produce a combined 370,000 tonnes of copper annually, are both affected by the strike, which is over a pay settlement.

The company’s Ilo smelter, which processes 350,000 tonnes of copper each year, is also the scene of industrial action.

The three unions representing workers at Southern Copper’s Peruvian operations have rejected an 11.5% wage increase and the situation could worsened, if the country’s National Federation of Mining, Metallurgy, and Steel Workers Union goes ahead with its threat of a nationwide strike, on November 5th.

When the strike began on Tuesday, operations at Cuajone and Toquepala were approximately 50% staffed and Oscar Gonzalez, Southern Copper’s chief executive, believes the action could cut output by 10% in 2007.

Southern Copper’s parent company, Grupo Mexico, is also hit by strike action, at its Cananea copper mine and it is estimated that the company had lost around 50% of its Mexican copper production.

Traders are concerned about the combined effects of the difficulties of Grupo Mexico and Southern Copper, which is the world’s fifth largest copper producer.

Demand for the metal, which is mainly used by the construction industry, is expected to increase in the fourth quarter of this year.