27 Oct 2011

Impact of Papua mine industrial action will be minor if resolved quickly says anlayst

4:20 pm on 27 October 2011

A commodities analyst says the market impact of industrial action at Freeport McMoRan's Grasberg gold and copper mine in Papua will be limited if the dispute is resolved quickly.

About 8,000 of the operation's 23,000 workers in the Indonesian province have been on strike for more than a month, demanding significant wage increases and better working conditions.

The United States company has declared force majeure on shipments from the mine so it can avoid liability on existing customer orders.

The head of commodity strategy at TD Securities, Bart Melek, says the longer production stays offline the tighter the market will get.

"But in an environment where demand is seen to be somewhat better or at least expectations are somewhat better than they were before and at the same time you get supply disruptions, one could say with a fairly high level of comfort that price pressures are to the upside because of that."

Bart Melek says compared to previous periods in history there are more mining disruptions occurring that are bringing production below capacity.