Frozen pay and frosty relations: ASARCO’s copper mine strikes

JP Casey 17 April 2020 (Last Updated April 17th, 2020 12:53)

Close to 2,000 workers have been on strike in the US, at the facilities of one of the world’s largest copper producers. With years of bad blood between local miner ASARCO and local union the United Steelworkers, JP Casey considers the potential impacts of the dispute.

Frozen pay and frosty relations: ASARCO’s copper mine strikes
There have been years of bad blood between local miner ASARCO and local union the United Steelworkers. Credit: ksblack99

What began as a dispute over stagnant pay has snowballed into five months of industrial action at the world’s fourth-largest copper producer. The United Steelworkers (USW) union has called for strike action at five copper facilities in the states of Arizona and Texas owned by ASARCO, a subsidiary of international mining firm Grupo Mexico, which includes a 72,000 ton per year copper smelter and a 250,000 ton per day open pit mine, both in Arizona.

Close to 2,000 workers have been away from work since October last year, but there is no end in sight to the dispute. ASARCO is holding firm to its offer of stable pay and training opportunities for its employees, while the striking workers harbour long-running resentment towards their employers, who they claim have not offered a pay rise in a decade, despite rising costs of living. With high tensions and bad relations threatening copper production, miner welfare and local communities, we consider what the impacts of this protracted strike could be.

High production at a high price

Founded in 1888, ASARCO, originally known as the American Smelting and Refining Company, has been a key player in North American mining for over a century, with its acquisition by Grupo Mexico in 1999 catapulting the group into the upper echelons of global mining. Following the acquisition, the group boasted the world’s second-largest copper reserves and was the world’s fourth-largest producer of silver, and fifth-largest producer of copper.

The group has gone from strength to strength in recent years on the financial front, now boasting the largest copper reserves of any private company in the world. Its latest financial results, covering up to the third quarter of 2019, report a 7.7% increase in total sales and a 7.9% increase in EBITDA compared to the third quarter of 2018. The first three months of 2019 also saw an increase in net income of 14.3% over the same period the previous year, the latest positive development for a company that posted a 37% profit margin as recently as 2016.

This financial success, however, has ultimately turned many of its workers against the company, who are angry at the firm’s constant financial growth, none of which seems to make its way down to them. Grupo Mexico’s latest report notes that the number of employees has remained constant between the first three quarters of 2018 and 2019, with the total number of employed rising just 0.2%, but investments and capital expenditure collapsed over this period, falling 32%, leading to allegations that the company’s recent strong profit margins have been as much to do with impressive production totals as cutting back on worker pay and benefits.

These losses hit particularly hard for the USW workers considering their contribution to ASARCO’s, and Grupo Mexico’s, recent production totals. The parent company exceeded one million tons of copper produced in 2016, with around one-fifth of that coming from US-based operations, such as those in Arizona and Texas, and this combination of improved financial performance on a macro scale, and negligible financial benefits on a micro scale, has soured relations between ASARCO and the USW.

Bitter resolve and growing tensions

USW miners working at ASARCO operations earn $23.75 an hour, with this total set to rise to $24.50 an hour in three years, and while this is in keeping with what Payscale reports is an average miner’s salary across the US, many miners still feel short-changed. Union workers are currently working under a pay scheme that has been frozen since February 2010, which has seen health care benefits cut and new workers ineligible for the company’s pension plan, driving a rift between the miner and both new and established employees.

ASARCO’s refusal to negotiate on employee pay is the latest in what the miners consider to be a long line of slights made by the company at their expense. Last October, the same week that the workers first went on strike, the US Supreme Court upheld local court rulings that ASARCO owed its employees up to $10m in bonuses that were wiped clear as part of a 2011 contract renegotiation, which saw workers’ pensions cut in exchange for better bonuses, worth up to $8,000 per employee.

ASARCO’s latest contract offer, which it dubbed its “last, best and final” proposal, drew criticism from the USW, with 77% of employees “insulted” by the offer, according to union officials. This new deal would see no wage increases for two-thirds of employees, no pension increases for workers hired before July 2011, and a total absence of what the union called “successorship provision” to protect employees should ASARCO sell its facilities.

Considering the workers had been previously operating under a 2018 extension to an equally unpopular contract first agreed in 2017, this was an excellent opportunity for ASARCO to take the lead in implementing a long-term deal that would benefit both parties, and its failure to do so has fractured relations.

Social and economic impacts

While the strike is barely 100 days old at the time of writing, union workers are beginning to suffer. The USW has pledged to pay each striking worker $225 a week, close to a quarter of what they could have expected to earn under the ASARCO contract they were so eager to stand against. Striking miners have also been forced to rely on external support for basic amenities such as groceries and clothes, according to both USW press releases, and local news outlets.

In Arizona, striking miners are reliant on donated food supplies from local churches and the Maricopa Area Labor Federation, while a separate branch of the USW has been operating a food pantry in Amarillo, Texas, near ASARCO’s facilities. Stories such as these paint a picture of an industrial movement with a considerable amount of public support and general goodwill, but also of a striking workforce wholly abandoned by the institutions around them.

This abrupt end to production, coupled with increasing public resentment towards Grupo Mexico, could have negative impacts for the miner itself. While quarterly financial reports are not yet available, so long-term conclusions cannot yet be drawn, the company’s share price has fallen consistently from $3.09 per share on January 17 to $2.59 a share on February 24, a loss of almost one-sixth of value in just over a month.

In its latest financial report, the miner made it clear that operational efficiency was among its priorities, claiming that “we confirm our first place as the company with the lowest cash cost in the industry, at $1.06 per pound.” While this approach has yielded world-leading production volumes in the recent past, the company’s inability to negotiate with its employees, and hard-line commitment to the bottom line, could be finally leading to a decline in shareholder confidence; if the two sides cannot reach an agreement soon, both parties may ultimately suffer in the long term.