LONDON, Sept 11 (Reuters) - (Karen Norton is a Thomson Reuters GFMS analyst. The views expressed are her own.) Global economic slowdown means the focus in the copper market in recent months has been on weak demand growth. But it's probably time to take a look at the supply side of the equation, specifically in Chile, Canada and Peru - historical hotbeds of unrest - where crucial labour contracts are due to be renegotiated in the next year or so.
Labour disputes in the copper industry have been sporadic and short lived so far this year, providing a stark contrast to precious metals, where strike action continues to plague top platinum producer South Africa.
But industrial action is difficult to predict and memories linger of the three-month-long strike that began about a year ago at Freeport McMoRan Copper & Gold's mine in Indonesia.
The disruption at Freeport's Grasberg, one of the world's biggest copper mines, was largely responsible for a 210,000-tonne drop in output at the operation last year. Although this figure is small compared to global mine supply of 16.0 million tonnes, timing magnified the impact.
The strike reinforced perceptions of tight mine supply in the final quarter of 2011 and helped to limit declines in the copper price to not far below $7,000 a tonne.
Thomson Reuters GFMS estimates global output losses from labour disputes last year amounted to 306,000 tonnes of copper, or just over half of total unexpected mine output losses, which also encompass technical and weather-related disruptions.
Some significant copper labour contracts come up for renewal in the next few months, most notably in top producer Chile, at state-owned giant Codelco. Events there will indicate whether the lull in unrest is only temporary.
For a market where supply growth is still sluggish due to factors including falling ore grades and project delays, any further threat to output levels inevitably would be of concern, even while demand is subdued.
Global mine output growth last year was pegged back to a marginal 0.6 percent, which took it to a total of 16.021 million tonnes. A modest 2.2 percent rise is predicted this year, which leaves little room for manoeuvre in a market tending towards deficit.
Strike-related shortfalls admittedly look set to be more muted this year. But several contracts due for re-negotiation in the next few months and into 2013 require attention and may point to a busier, more disrupted period.
CLEAR BATTLE LINES
Workers will want to benefit from what they consider still historically high copper prices.
Mining firms under the watchful eye of shareholders and faced with falling profits in some key parts of their business will want to keep a lid on wage costs. They will not want hard-to-reverse rising wage bills to eat into already shrinking profits.
Talks at Codelco's Andina mine in Chile, where the present deal runs out on Dec. 1, is first on the agenda.
They are expected to set the tone for other pay negotiations, most notably at the firm's flagship Chuquicamata complex where the present deal expires next February. It has experienced its fair share of industrial disputes over the years.
The contract-talks merry-go-round then moves on to an expiry next May at Xstrata's CCR refinery in Canada, and in June at BHP Billiton's majority-owned Escondida, the world's biggest copper mine.
Disgruntled workers there went on strike outside normal contract talks last year, although the company played hard ball and its original offer was accepted after a two-week strike.
Copper workers are in a better bargaining position than many miners.
Earlier this year workers at First Quantum's Kansanshi mine in Zambia secured a 15 percent pay increase after strike action in January and March.
The union at the Antamina mine in Peru, where talks have continued after the late July expiry, reportedly is seeking a 10 percent pay rise and, interestingly, a contract lasting one year rather than the usual three.
Companies may be cutting jobs in iron ore and coal, and BHP Billiton may have shelved its Olympic Dam copper-uranium expansion plans in Australia because of escalating costs, but copper projects in general are still desperately needed on top of existing production to feed still strong future demand projections.
Against this backdrop, labour negotiations will remain a fine balancing act at copper operations at least for the next couple of years, tipped slightly in favour of workers.
Beyond that, while there will still be flashpoints, the anticipated easing of mine supply towards the middle of the decade is likely to erode some of the unions' remaining bargaining power.