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SANTIAGO, April 20 (Reuters) - When Antofagasta Chief Executive Diego Hernandez took the stage at the world's biggest copper conference last week, he talked about the growing risks mining companies face from rising worker salaries in South America due to staff shortages and strong unions.
What he didn't mention at the CRU copper conference in Santiago was the far graver immediate labor threat that many of his rivals face: the biggest round of contract negotiations since 2011, and likely the most contentious in years as falling copper prices and deep cost cutting programs strain relations between workers and operators.
The copper market seems to be perilously indifferent to the threat posed by this year's contract talks at mines including one of the world's largest, Grasberg in Indonesia, and Antamina, Peru's biggest, risking a bullish shock if workers move to strike, analysts said.
"I think people are assuming with the change in the market, it's going to automatically mean unions will be more flexible. But it could be a very tough situation," Juan Carlos Guajardo, executive director of Santiago-based mining consulting firm Plusmining, said.
Last year, Antofagasta agreed to four-year contracts, including pay increases and cash bonuses, at its mines across Chile.
But the outcome of talks at Antamina and Grasberg, where contracts expire in July and September, respectively, and worker unrest that has paralyzed production recently, may set the tone for the industry this year.
Antamina's majority shareholders are Glencore and BHP Billiton, while Grasberg, which has been plagued by worker strife in recent years, is majority-owned by Freeport McMoRan Inc.
With just over two months before talks are likely to start, the union representing most of the 2,860 workers at Antamina says it won't scale back its demands due to the fall in the copper price.
"There's a tendency to dramatize by saying prices are low ... But they (Antamina) are still profitable," Jorge Juarez, the secretary general of the Sutracomasa trade union, told Reuters.
By historic standards, prices around $6,000 per tonne are not low, he said. Ten years ago, prices were around $3,500 per tonne.
Still, in a sign that talks may be more complicated than in previous years, Juarez said he may propose a one-year collective agreement, rather than the usual three.
For the company whose profits have been hurt by the weaker market conditions, lower prices will "definitely influence" negotiations, a spokesman for the mine said.
The shareholders declined to comment, referring Reuters to the mine operator. BHP Billiton and Glencore have 33.75 percent stakes, while Teck Resources Ltd has a 22.5 percent interest, and Mitsubishi Corp has 10 percent.
Freeport, Southern Copper and Teck, which own mines with expiring labor agreements, declined to comment for this article.
Four years ago, the last time such a large number of contracts were up for renegotiation, workers at the world's biggest copper mines in Chile, Peru and Indonesia downed tools for a bigger slice of the bumper revenue miners were making from record copper prices around $10,000 per tonne.
Thousands of Codelco workers staged a companywide strike, the first in nearly two decades, and an eight-day strike over pay stopped production at Grasberg while miners at Escondida, the world's top mine, staged a one-day strike over wages.
Estimates vary on how much copper was lost due to that wave of industrial action, but the outages helped propel prices back towards $10,000 per tonne.
This year, the backdrop is starkly different: prices are languishing at six-year lows around $6,000 per tonne; a quarter of the world's mines are unprofitable; miners are in the throes of the most vicious cost cutting regime in years and demand from China, the world's top consumer, is slowing.
In Chile, which produces a third of the world's copy, miners are worried about labor reform proposed by President Michelle Bachelet's socialist government, which aims to modernize collective contract negotiations and strengthen unions, Plusmining's Guajardo said.
Even so, discontent remains high among workers seeking a larger share of a decade-long economic boom fuelled by high copper prices.
That could be the ingredients for potentially explosive talks that drag on longer than usual as companies resist union demands, said Standard Bank base metals analyst Leon Westgate.
In the past, Antamina's wage talks have lasted more than five months, the spokesman said.
Negotiations could also be a flashpoint for a nervous copper market with supply and demand so finely balanced, Dane Davis, commodities market analyst at Barclays, said on the sidelines of the conference.
"Contract negotiations are particularly important this year. If we see disruptions (to output), it could push the market into deficit and produce a strong driver to prices," he said. (Additional reporting by Teresa Cespedes in Lima, Peru, and Anthony Esposito in Santiago, Chile; Editing by Phil Berlowitz)