SYDNEY--Job cuts in Australia's mining industry are
intensifying, with companies that enjoyed a decadelong boom axing
thousands of workers as the value of commodities like coal and gold
fall to multiyear lows.
More than 1,000 jobs have been cut this week alone in the mining
sector, underscoring the challenge facing Prime Minister Kevin
Rudd, who returned to power late Wednesday promising to cushion the
economy from the slowing resources investment.
Australia's resources sector accounts for almost 10% of the
country's job market--about double the level a decade ago--and
close to 20% of national output.
Glencore Xstrata PLC (GLEN.LN) and Peabody Energy Corp. (BTU)
became the latest mining companies to lay off workers in a bid to
protect margins when falling commodity prices and rising production
costs make many operations unprofitable. While many of the job
losses involved permanent staff, companies are also axing
contractors brought in to operate machinery or run mines as they
seek to keep costs under tighter control.
Once the engine of Australia's economy, helping the nation stave
off a recession during the global financial crisis, the mining
industry is reeling from a sharp slowdown in prices of many
commodities amid cooling growth in top trading partner China.
Several big companies like BHP Billiton Ltd. (BHP) have canceled or
delayed projects, closed mines, and put assets up for sale as the
outlook for major commodities worsened.
Glencore said Thursday it would shed about 450 workers and scale
back output at its Newlands and Oaky Creek coal mines, both in
Australia's Queensland state, due to lower prices, high costs and
the strong Australian dollar.
The company--which has already cut hundreds of workers and
abandoned plans for a new coal shipping facility in recent
months--signaled possible further layoffs as a review of its coal
operations continues.
"This is a difficult decision but one that needs to be taken in
the current challenging economic conditions," Glencore Xstrata said
in an emailed statement.
It came only a day after Peabody said it would also cut 450 jobs
from its coal mines on Australia's east coast in response to the
market downturn.
"We are taking these steps to secure the long-term
competitiveness of our operations," a spokeswoman for U.S.-based
Peabody said.
The current problems facing Australia's mining sector partly
have their roots in its earlier success. When thermal coal prices
surged to a record high above $190 a metric ton in 2008, companies
rushed to invest billions of dollars in new mines and lock in space
at ports so they could export more raw materials to Asia.
The new supply is now weighing heavily on the market, with
Australian coal having to compete for customers with cargoes
rerouted from North America and Europe, where there is lackluster
demand. Coal shipments into China and Japan--the world's two
biggest importers--are up 13% and 9%, respectively, in the first
five months of the year, but this hasn't been enough to drain the
excess supply.
Underscoring the weakness in prices, Tokyo Electric Power Co.
(9501.TO) agreed an annual contract to buy Australian thermal coal
from Glencore Xstrata at US$89.95 a ton, a person familiar with the
matter said Thursday. That's about half the level of coal's 2008
peak.
Anglo American PLC (AAL.LN) chief executive Mark Cutifani this
week estimated about 9,000 mining jobs had been lost in Australia's
coal-rich Queensland and New South Wales states over the past year,
and warned "those numbers look like they are about to rapidly
increase."
Mr. Cutifani, in an interview Thursday, warned Australia's coal
industry was now at a tipping point. Anglo American this month said
it planned to suspend operations at its Aquila coal mine in
Queensland state because it couldn't see prices of the fuel
rebounding over the remainder of the year. Shuttering the mine
could lead to the loss of up to 100 jobs.
More could be at risk, Mr. Cutifani said. "We have 500 jobs we
are desperately trying to hold" at the miner's Drayton South coal
project in New South Wales, which was recently delayed due to a
government review, he said.
Miners of other commodities are also swinging the ax.
Barrick Gold Corp. (ABX), the world's largest gold producer by
output, has cut 87 workers from its Australian operations this
month and plans to shut a regional exploration office by the end of
the year. The company, which has also announced redundancies at its
head office in Toronto and across its U.S. operations, cited an
increase in operating costs and falling gold prices for the
cuts.
Australia's largest listed gold miner, Newcrest Mining Ltd.
(NCM.AU), is trimming about 250 jobs after gold prices fell 26%
since the start of the year, largely from its Lihir mine and
Brisbane office, which it will close.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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