SANTIAGO, Aug 13 (Reuters) - Workers at BHP's

huge Escondida mine in Chile launched a strike on Tuesday after

pay negotiations with management collapsed, setting the stage

for a potential blow to production at the world's largest copper

mine.

The workers' union, which represents about 2,400 people, or

most of the mine's frontline workers, began the strike action at

8 a.m. (1200 GMT), demanding a bigger slice of copper profits

that have been buoyed by recent high prices.

BHP said it had activated a contingency plan in response.

The strike, after the union encouraged members in recent

weeks to reject BHP's offer, has stirred up memories of the last

major Escondida walk-out in 2017, which hit BHP's copper

production and pushed up global prices of the metal.

Analysts, however, said the market was so far staying calm,

with hopes for a quick resolution and weaker demand from top

copper consumer China dampening the impact. BHP's U.S.-listed

shares edged down and copper futures were stable.

"The market is taking it in its stride," said Chris

LaFemina, a metals and mining analyst at Jefferies, though he

flagged the potential for the strike to encourage other labor

disputes in Chile.

"If you get a series of mine disruptions, that can have an

impact on the market."

Workers from one of three unions at Lundin Mining's ( LUNMF )

Caserones copper mine in Chile also started a strike on Tuesday

over failed pay negotiations.

BHP had offered a $28,900 bonus per worker, compared with

the union's demand of 1% of shareholder dividends for the mine,

which would amount to roughly $36,000.

"We made every responsible effort to reach an agreement, but

that wasn't possible," the Escondida union said in a statement.

FOUR PROPOSALS

BHP said it had not anticipated a new set of demands from

the union at the end of five days of government-mediated talks,

and defended its contract as one of the best in the industry.

"The company formulated four proposals responding to each of

the points raised by the union, who on the last day of mediation

presented new requirements," BHP said in a statement.

BHP, one of the world's biggest miners, owns more than half

of Escondida in northern Chile, along with Rio Tinto and

JECO Corp. The site produced 1.1 million metric tons of copper

in 2023.

Some 60% to 70% of Escondida's copper concentrates are

shipped to China, a source with knowledge of the matter said. A

cutoff of Escondida concentrates could hit supply chains of

Chinese smelters, which produce half the world's refined copper.

Union President Patricio Tapia told Reuters previously that

a strike by members would see BHP unable to produce copper,

since replacement workers are prohibited by law and the union

represents 98.5% of frontline operational workers at Escondida.

The group cited the favorable outlook for copper prices as a

reason to press for higher pay, with the metal expected to be in

even higher demand for the global energy transition and

artificial intelligence applications.

The union is also seeking to improve conditions for workers

who lose their jobs due to outsourcing and automation as well as

health benefits, bonuses and more.

The union and BHP have repeatedly clashed due to work

stoppages, pressure to increase production and complaints about

worker safety.