UPDATE 2-Transnet meets unions to try end dispute
* Transnet says looking for compromise to end dispute
* Auto industry nears crisis if strike prolonged
* ArcelorMittal South Africa declares force majeure
(Adds fresh quotes, ArcelorMittal, fuel)
JOHANNESBURG, May 18 (Reuters) - South African transport unions met logistics group Transnet [TRAN.UL] on Tuesday to resolve a wage dispute that has paralysed port and rail operations in Africa's biggest economy and hit fuel supplies.
The strike, now in its second week, has dented exports of metals, fruit and wine to Europe and Asia and nearly stopped imports of automotive parts after two-thirds of logistic group Transnet's 54,000-strong workforce joined in.
Talks between Transnet and labour failed over the weekend, despite unions lowering their pay rise demand, but negotiations restarted on Tuesday under pressure from government and industry to put an end to the dispute.
"The talks are ongoing. It will definitely be an all-night thing," said George Strauss, president of the United Transport and Allied Trade Union (Utatu).
Transnet would not say if it may be willing to get closer to the union's demand of a 12-13 percent pay rise, but said it was optimistic that a compromise could be reached. In the past, Transnet has said it could not afford more than 11 percent.
The industrial action is the latest protest in the country ahead of next month's soccer World Cup, and FIFA said imports of some equipment for the event have been affected.
The strike has raised criticism of workers among economists and the central bank for using the World Cup to push for wage hikes way above inflation of 5.1 percent.
"While a disrupting strike during the World Cup remains unlikely, parastatal capitulation to double-digit raises will stoke inflationary pressures, widen the budget deficit and raise wage demands in the private sector," Eurasia Group said.
Economists estimated the impact in the hundreds of millions of rand, but said it may quickly rise to billions if the strike drags on this week and if other unions join in support.
The strike, which spread beyond Transnet, has already hit commuter rail links, leaving millions of passengers stranded.
Utatu and the South African Transport and Allied Workers Union (Satawu), represent 85 percent of Transnet's workforce.
With nearly two-thirds of Transnet's workers on strike, the container sector has been hardest hit so far, officials said.
Car manufacturers were struggling to get parts and to export their cars, said David Powels, president of the National Association of Automobile Manufacturers of South Africa.
"Day by day plants are shutting down. In another 2-3 days, all the automotive companies will largely be shut down because we cannot secure the inbound logistics chain," he told Reuters.
Automaker BMW South Africa said it would have a backlog of 2,000 export cars if the strike goes beyond this week.
The automotive industry is one of the country's largest manufacturing sectors, and contributed nearly 6 percent to GDP in 2009, while exports of vehicles and components made up 11 percent of total exports.
So far coal exports to power plants in Europe and Asia have not been affected, with sufficient stocks at the port.
The strike has slowed down movement of petroleum products to depots, but there were no reports yet of retail sites running dry, the South African Petroleum Industry Association said.
ArcelorMittal's South African unit declared force majeure on shipments, joining other global metal exporters including Anglo American Plc's (AAL.L) South African iron ore unit and Xstrata XTA.L, which said they could not supply their customers.
On Monday, Utatu and Satawu also began a strike over wages at South Africa's Passenger Rail Agency (Prasa), halting all commuter rail operations. Separate talks were being held to resolve this dispute, Utatu said. (Additional reporting by Wendell Roelf; Editing by Sonya Hepinstall)
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