The world price of copper will come under pressure this morning after thousands of workers at the Grasberg mine in Papua, Indonesia, ended a four-day strike yesterday.

The strike at Grasberg lit up the London Metal Exchange’s (LME) copper market last week with conflicting reports over production losses after workers began to protest on Tuesday.

Mining companies and their investors are also likely to be perturbed by the fact that Freeport McMoran, the American mining company that owns Grasberg, saw off the strike by agreeing to double workers’ wages. Firms are worried by rising production costs and are especially concerned that they may start to spiral out of control.

More than 6,000 Papuans walked off the job, threatening output at the huge open-pit operation, which produces more than 500,000 tonnes of copper annually and is the Indonesian Government’s biggest source of revenue.

Anxiety about production cuts at one of the world’s biggest copper resources, together with continuing strong demand from China, combined to push the LME’s three-month copper contract above $8,000 a tonne on Friday.

The vast Grasberg operation, which supplies about 4 per cent of the world’s copper, has been plagued with controversy over its effect on the environment, the share of the profits that are received by Papua and relations with the local Papuan workforce. Reports from Indonesia suggested that output at the mine was running at 20 per cent of normal levels during the walkout.

Tongoi Papua, the union representing the Grasberg workers, claimed victory over the weekend.

“We are satisfied,” Frans Pigome, head of Tongoi Papua, said. “After more than 40 years in operation, this is the most spectacular increase. They could have increased it years ago, but they think only how to profit themselves.”

Freeport has agreed to raise basic wages from 1.5 million rupiah (£82) a month to 3.1 million rupiah. In addition to the wage increase, the union had been seeking better career opportunities for Papuans at the mine.

Freeport Indonesia said that the company had agreed to a feasibility study for the creation of a Papuan affairs department and remained committed to increasing the number of Papuans in senior posts.

The Grasberg strike is the latest incident in a tide of labour unrest that threatens the global mining industry with rocketing wage inflation, another headache to add to the burden of energy costs and an acute shortage of equipment, from lorries to tyres. The price of copper has risen fourfold in five years because of extraordinary increases in demand in emerging markets, notably China, where the construction and manufacturing sectors are consuming copper pipe and wire.

Other base metals, such as iron ore and nickel, are benefiting from Asia’s growth and the soaring rices have raised expectations among mining communities, which are seeking a share of the super-profits from a hot metal market. In March Zambian copper miners secured wage increases of 20 per cent and over the past year Codelco, the Chilean state copper mining company, has suffered a wave of strikes and protests over new labour contracts.

A strike at Escondida, the Chilean copper mine operated by BHP Billiton, effectively shut down the world’s biggest copper producer for a month in August last year. In March this year Inco, the Canadian nickel mine recently acquired by CVRD, of Brazil, was shut down in a dispute involving technical and office workers.

GDP figures from China that were stronger than expected caused further jitters in base metal prices last week as traders reacted to expectations of greater demand and, at the same time, fears that China would tighten monetary policy in an effort to dampen demand.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax