BHP warns of job losses in Australian coal mines

Fri, Aug 17, 2012, 01:00

BHP BILLITON said worsening market conditions could lead to job cuts at its Australian coal mines as slowing industrial activity in China forces global miners to scale back operations.

Global coal output is set to shrink over the next year or two as miners grapple with a combination of low prices, weak demand and currency headwinds. High-cost Australian operations are under particular pressure.

Australia’s mining boom has hinged on China importing hundreds of millions of tonnes of iron ore, coal, copper and other minerals for most of the past decade, but China’s economy is now growing at its slowest pace in more than three years.

In a 50-50 partnership with Japan’s Mitsubishi, BHP operates six coal mines in Queensland’s Bowen Basin, yielding mostly metallurgical coal for steelmaking. At peak output they can supply a fifth of the world’s traded coal.

BHP this year closed one of the mines outright, citing poor profit margins. Closest rival Rio Tinto also said last month it was cutting an unspecified number of jobs at one of its Australian coal mines.

“Against a backdrop of increasing costs and falling commodity prices, we continue to focus on reducing our overheads and operating costs,” BHP said.

“We don’t intend to provide any detail about specific adjustments, but clearly there may be some impact on jobs in some areas.”

BHP employs about 10,000 at the Queensland mines, including 3,500 unionised staff already engaged in an 18th-month dispute over conditions and job protection.

Australia has become one of the highest-cost coal miners globally, matching the US and Russia with cash costs – to mine and move it to port – of $90-$100 a tonne for some mines, compared with $30-$50 in Indonesia and South Africa.

Labour inflation in Australia has spiralled, and the strength of the Australian dollar has intensified the squeeze on margins.

Average employee costs in Australian coal mining are over $100,000 a year, more than triple the cost in South Africa or Colombia. Benefits can include condominium-style mining camps and two-weeks-on 10-days-off rosters, with flights to exotic places like Bali thrown in. – (Reuters)