Commodity Prices Under the Threat of Operational Disruptions: Labor Strikes at Copper Mines

48 Pages Posted: 29 Jun 2022

See all articles by Viviana Fernandez

Viviana Fernandez

Universidad Adolfo Ibañez

Boris Pastén

University of Chile

Pablo Tapia

University of Chile - Department of Business Administration

Rodrigo Andres Wagner

UAI Business School ; Growth Lab - Harvard University (Center for Int. Development)

Date Written: June 21, 2022

Abstract

The threat of short-term supply disruptions may matter for commodity prices, although their magnitude is hard to detect, for example, due to anticipation, storage and the relatively short duration of strikes. This article uses a century of labor strikes in Chile copper mines (1910-2010) to explore their effect on global commodity returns. Around strikes, copper displays cumulative abnormal returns (CAR) close to 200 basis points (bps). Consistent with the threat of supply disruptions, the effect comes almost fully from strikes at larger mines (CAR of 500 bps). In spite of strikes being transitory events, we also find a mirroring appreciation of the USD/CLP commodity currency. Out-of-sample forecasts for strikes during the decade 2000-2010 are reasonably accurate, suggesting that the commodity market response to such events has not varied much over time.

Keywords: Commodity currencies; Exchange Rates

JEL Classification: F31, F41

Suggested Citation

Fernandez, Viviana and Pastén, Boris and Tapia, Pablo and Wagner, Rodrigo Andres, Commodity Prices Under the Threat of Operational Disruptions: Labor Strikes at Copper Mines (June 21, 2022). Available at SSRN: https://ssrn.com/abstract=4143940 or http://dx.doi.org/10.2139/ssrn.4143940

Viviana Fernandez

Universidad Adolfo Ibañez ( email )

Avda, Diagonal Las Torres 2700
Office 512-C
Santiago
Chile
56223311706 (Phone)

HOME PAGE: http://https://negocios.uai.cl/profesor/viviana-fernandez/

Boris Pastén

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421
Chile

Pablo Tapia

University of Chile - Department of Business Administration ( email )

Diagonal Paraguay 257
Santiago, Please Select (only U.S. / Can / Aus) 8330015
Chile

Rodrigo Andres Wagner (Contact Author)

UAI Business School

Diagonal Las Torres 2700
Penalolen
Santiago
Chile

HOME PAGE: http://https://sites.google.com/site/rodrigoawagner

Growth Lab - Harvard University (Center for Int. Development) ( email )

79 John F. Kennedy Street
Cambridge, MA MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
106
Abstract Views
435
Rank
473,413
PlumX Metrics