The five-day strike at BHP Billiton’s Escondida mine threatens to drive copper prices to record levels and the company has declared force majeure to protect itself from contracted delivery schedules.

The miners have twice failed to turn up at arranged meetings with BHP but agreed to formal discussions starting at 5pm Chile time. Copper traders were optimistic that this might lead to a resolution and copper prices dropped about 3.8 per cent to $7,570 (£3,982) per tonne yesterday.

Traders had cautioned that the strike at Escondida, which accounts for 8 per cent of world production, could push prices past the May record of $8,800 a tonne. Demand from Chinese and Japanese factories in particular has driven up copper prices by about 400 per cent over the past three years.

More than 2,000 miners are demanding higher pay. Their three-year contract at the mine in Chile’s Atacama desert has expired and they believe that their new pay package should reflect the rise in copper prices.

They are asking for a 13 per cent pay rise as well as a $30,000 per person bonus. At present they earn about $40,000 a year — well above average for South America. BHP has offered a 3 per cent rise, a $15,000 signing fee and soft loans.

A company spokesman said: “A meeting has been arranged and we see this as a positive step towards resolving this situation. We believe it is in the best interests of everyone to get this sorted.”

The Escondida mine is 57.5 per cent owned by BHP and 30 per cent owned by Rio Tinto. It produces 1.3 million tonnes of copper a year.

The price of copper has had an unpredictable ride during the strike, affected by uncertainty over production and external factors such as Thursday’s security alert in London. Earlier yesterday the price rose to $8,030 a tonne and on Thursday it traded at a four-week high of $8,150 as speculators bet that Escondida output would be cut by the strike.

On the London Metal Exchange yesterday, copper ended trading at $7,570, down $305 from Thursday’s close.

Naohiro Niimura, a vice-president of Mizuho Corporate Bank, said: “Copper could rise towards $8,000 again because the strike is still on. But there is a perception that the global economy could slow down around the end of the year, which is making funds a bit careful about chasing copper on rallies.”

BHP declared force majeure on Tuesday, a day after the strike started. This legal device allows the company to miss contracted obligations by claiming unforeseen circumstances, typically when natural disasters interrupt production.

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