Mining Protests Across Three Continents Threaten Commodity Prices

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Mining workers are striking because they want more pay and better conditions now that the corporations they work for are seeing bigger profit. (Photo: Angelos Fasoulis)
Mining workers are striking because they want more pay and better conditions now that the corporations they work for are seeing bigger profit. (Photo: Angelos Fasoulis)

ECONOMY

  • Thousands of miners striking in South Africa, Chile and Australia for higher pay and better working conditions
  • Coal, oil, metal and diamond industries affected
  • Stoppages cause petrol shortage, coal stockpiles

Tens of thousands of angry workers in South Africa's coal, oil, metal and diamond industries are demanding higher pay as strikes surge in Australia and Chile. Roughly 30,000 coal workers for Xstrata, Optimum Coal Holdings, Anglo American Thermal Coal and Exxaro Resources stopped working two days ago after wage talks failed.

South Africa's National Union of Mineworkers (NUM), which is the country's largest labor union, has demanded a pay raise of 14% for their workers. Oil workers have been on strike since July 11 after an unsuccessful demand for an increase in pay of at least 10%. Talks with fuel employers have resumed after gas stations for Royal Dutch Shell ran dry.

Negotiations in South Africa's gold industry have now come under a deadlock after yesterday's talks. More than 200,000 gold-sector workers are expected to join the country's strikes. Anglogold Ashanti and Gold Fields are offering the lowest-paid workers a 9% increase, average-paid workers an 8.5% increase, and highest-paid workers an 8% increase. The Commission for Conciliation, Mediation and Arbitration has issued a certificate of non-resolution.

The Chamber of Mines stated, “The offer by all the companies for 2012 was half a percent less in all categories. The implication of the union's decision is that they may exercise their rights in calling on their members to strike.”

Also on the walk out are 5,000 diamond workers who began striking after diamond leader De Beers refused to grant NUM a 15% rise in wages for De Beers Consolidated Mine workers. Although the latest De Beers offer is 7%, as opposed to the 5% initial proposal, the company says that it is more than willing to continue open conversations with unions in an attempt to reach a mutual agreement.

Strikes Ongoing in Australia, Chile

Major strikes are also affecting the economies of Australia and Chile. Stoppages at three of global mining giant BHP’s Australian coal mines in Queensland are in effect. Rolling strikes, which began in June, have been the first in over a decade, with workers stopping between 12 and 36 hours. Other mines are expected to follow.

Employees are seeking contract alterations regarding job security, recruitment, and training and development. BHP workers in Chile have extended their protests at the Escondida mine, which produces one-fifth of all Chile's copper. The mine staff want higher production bonuses and better work conditions. The company has indicated that it no longer wishes to converse with union officials, according to union leader Salomon Alcaino. Alcaino warned that more copper mines may join Escondida as the Chilean mining union movement is on a “state of alert” and could strike if demands are not met.

Why the Uproar?

Gold, copper and coal are at near-record prices. Workers want an extra piece of the pie now that the corporations they work for are profiting. BHP is expected to announce profits that double last year's net income. Xstrata and Anglo American are also expected to have record profits of $7.3 billion and $7.4 billion, respectively.

While copper prices have risen 38% in the past year, and rose again last week due to strike concerns, gold has recently hit a new record in London and New York. The strikes may have also contributed to a rise in coal prices, which were already high following Australia's floods earlier in the year.

In South Africa, workers are seeking higher wages for different reasons. They are demanding above-inflation wage increases to address pay inequalities that were caused by the nation’s racial segregation apartheid system, in place until 1994.

Economic Impact

The strikes have seen stock prices drop for gold and metal producers Anglogold, Harmony and Gold Fields. Oil has run out at Royal Dutch Shell, with gasoline shortages due to employee walkouts forcing Sasol to cut production at its Secunda plant. Coal has been stock-piled for weeks and the load may need to be shed soon.

The Federation of Unions of South Africa, or Fedusa, has condemned coal employers for failing to negotiate in good faith with the United Association of South Africa (Uasa), a registered trade union. Franz Stehring, Fedusa's chief negotiator, has stated that he is concerned that employers may try the “age-old tactic of retrenchment” during negotiations, which refers to cutting costs and threatening the jobs of employees.

Stehring took his condemnation a bit further saying, “It is clear to us that it is the intention of the employer to provoke workers into strike action by deliberately coming to the negotiating table with minuscule and unacceptable wage offers to compensate workers.”

Key Statistics – Global Gold Market

  • The global demand for gold exceeded 2,775 metric tons last year. That figure includes over 780 metric tons from India, over 570 metric tons from China and over 180 metric tons from the US. (source: China Gold Association)
  • Last year at the Shanghai Gold Exchange, over 604 metric tons of spot goods of gold exchanged hands, ranking China in first place for global gold transaction volume. China also produced over 340 metric tons of gold last year and has been the world's largest gold producer for over four years. (source: China Gold Association)
  • In the second quarter of 2011, gold outperformed many major assets including commodities. With a low quarterly average volatility of 13.4%, gold is significantly lower than its 20-year long-term average of 15.8%. (source: World Gold Council)

By Nicole Manuel for
Nicole Manuel is a freelance economics, finance and blog writer with a degree in economics and over two years of experience.

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