This phenomenon has largely gone unnoticed, but for about the past year copper prices have been rising (prices are in cents per pound). As with other commodities, like oil, gold, manganese, and nickel, much of this price increase is a consequence of rising global demand due to economic growth, particularly in places like China and India.
Now there’s news of a labor strike at one of the world’s largest copper mines, in Chile.
Copper rose $70, or 0.9 percent, to $7,930 a ton on the London Metal Exchange. In New York, copper slid on speculation that stockpiles will enable the mine to weather a strike. Copper for delivery in September slid 1.75 cents, or 0.5 percent, to $3.6150 a pound on the Comex division of the New York Mercantile Exchange at 1:25 p.m. New York time.
This Bloomberg story also points out something interesting about the wage negotiations: the rise in copper prices over the past year has led to unprecedented profits for mining companies; in fact, this story about Rio Tinto’s profits indicates a six-month increase of 75% at the same time as copper prices have risen 79%. The labor union at the Chilean mine, seeing this profit increase, sees this as a bargaining opportunity. It has the hallmarks of a story of labor and capital negotiating to split the Ricardian rents associated with ownership of extraction rights to a scarce natural resource.
Another example of market processes in this area comes from higher prices inducing more mining in places like Australia:
“The list of new mines coming on stream is the longest I can remember since the late 1980s,” said Sandra Close, whose company, Surbiton Associates, tracks gold mining in Australia.