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Mining companies Down Under being forced to call in administrators, shed jobs as commodity prices decline

24th October 2014

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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While largely living up to its popular nickname the ‘Lucky Country’ by remaining relatively untouched by the global financial crisis, Australia – and more specifically its resources sector – has not been immune to falling commodity prices.

The declining prices of coal and iron-ore, in particular, have had a significant impact on Australia’s resource companies, with several junior iron-ore companies being forced to call in administrators, while the majors are pressured into cost cutting.

Consequently, the Australian labour force has been targeted as an easily accomplished cost-cut, with miners dropping staff numbers to lower production costs.

Mining giant BHP Billiton has cut more than 1 100 jobs at its coal operations since the start of the year, with the latest round of redundancies seeing the miner and its Japanese alliance partner, Mitsubishi, culling some 700 staff members across their collective Queensland metallurgical coal assets.

Unions have been quick to cry foul, with the Construction, Forestry, Mining and Energy Union (CFMEU) saying the redundancies are a “ruthless and an unnecessary attack on jobs”.

Over the past decade, investment into Australia’s mining sector has grown from 2% of gross domestic product (GDP) to 8% of GDP, which, according to the Reserve Bank of Australia, significantly increasing the living standards of Australians.

By 2013, the mining boom had raised real per capita household disposable income by 13%, raised real wages by 6% and lowered the unemployment rate by about 1.25 percentage points.

As a result of the increased investment, Australia’s resources and energy commodity export earnings increased by 11% in 2013/14 to A$196-billion, despite tighter commodity market conditions and lower margins for domestic producers, according to analysis by the Bureau of Resources and Energy Economics (BREE).

However, the BREE has predicted that in 2014/15, Australia’s earnings from minerals and energy commodities will decline by 1% to A$192-billion as higher export volumes for most commo- dities are more than offset by forecast lower export prices and a persistently high Australian dollar.

With the declining commodity prices and the miners’ scramble to cut costs, Australia’s minerals industry professionals are experiencing double the average national unemployment rate.

Research by the Australian Institute for Mining and Metallurgy (AusIMM) has indicated that the unemployment rate in the mining sector reached double digits, at 12.2%, during 2014.

The industry body has pointed out that geology professionals are facing the highest level of unemployment at 15.1%, while one in ten minerals professionals was made redundant in 2013/14, reflecting a highly volatile employment market.

Workers in the mining industry have also reported strong pressure to work more hours for the same amount of pay, to accept lower pay or conditions for the same job, or to accept reduced working hours.

“Sustained high levels of unemployment are being felt across all minerals professional disciplines and all Australian states and territories. The impacts of cost cutting on the minerals sector have been particularly broad, deep and sustained. There are minerals professionals with many years’ experience who are struggling to find work,” says AusIMM president Geoff Sharrock.

Further, AusIMM research shows that less than half of the industry body’s student members are confident that they will find gainful employment in the sector once they graduate, while more than half of AusIMM’s members believe that there will be fewer professional job opportunities in the minerals sector in the coming year.

“The mining sector relies on its minerals professionals to drive innovation and productivity improvements. The Australian economy relies on minerals professionals to find and develop the resources that will become the mines of the future. It is distressing to see these highly trained professionals out of work,” says Sharrock.

The Australian Department of Employment has estimated that over the five years to November 2018, employment in the mining industry will decrease by 4.5%, equating to a fall in employment of around 12 300.

Government has noted that this represents a significant slowdown, compared with growth recorded over the five years to May 2014, which saw employment numbers increase by 106 700, or 66.2%.

At sectoral level, the projected decrease is expected to be concentrated in metal ore mining, which is projected to see job losses of some 6 200; the exploration sector, which is projected to lose 5 400 personnel; and the coal mining sector, which is projected to cut 5 100 jobs.

The unemployment debate has spilled over into government’s foreign employment programme, with AusIMM demanding that government remove most mining-related occupations from its 457 visa scheme, which allows for foreign workers with certain skill sets to be employed by Australian companies.

The visa was widely used during Australia’s mining boom, with mining companies importing geologists, engineers and metallurgists from outside Australia to staff their operations.

“Government must act now. We have clear evidence of high unemployment across occupations that remain on government’s 457 list. Government must act urgently to remove these key professions from the 457 list,” says AusIMM CEO Michael Catchpole.

However, the Minerals Council of Australia is adamant that the 457 visa should remain unchanged, pointing out that, as commodity prices have fallen and the demand for labour reduced, so has the demand for workers on the 457 visa.

“In the 12 months to June 30, total primary 457 visa holders in the mining sector decreased by 19%, from 7 860 to 6 380. The suggestion that employers are giving preference to foreign workers during the current slowdown is just plain wrong,” says the council’s CEO, Brendan Pearson.

Currently, only 2.7% of the minerals sector workforce is employed on the 457 visas, down from 3.8% at the height of the commodity price boom.

“The 457 scheme will remain an important element of an integrated workforce strategy for a global-scale industry like the Australian mining industry.

“Although the Australian minerals industry spends twice as much on training as the industry average, employs 1 in 20 apprentices and subsidises university training courses in key disciplines, there will always be a need to resort to foreign employees in specific skills categories,” adds Pearson.

The Australian government recently reviewed the 457 visa programme, unveiling changes that would make it easier for employers to import labour. The Immigration Department is proposing a fast-track approvals process for larger companies with clean track records, a relaxed English-language requirement and a consideration for a 10% reduction in the maximum income threshold.

While the Minerals Council considered the recommendations made in the review to be a “sensible path forward”, the CFMEU has campaigned against a proposal to abolish the requirement for employers to advertise jobs to the local markets before filling them with 457 nominees.

Instead, it has called for labour market testing to be expanded, while raising the concern that a relaxed English-language requirement could cause the risk of serious injury in the workplace.

“Australians have a right to ask in whose interests government is acting? Certainly not the 566 000 Australians currently seeking full-time work. It is only business – and especially big business – that will benefit,” CFMEU national secretary Michael O’Connor says.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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