RIO chops hundreds in Pilbara

From the SMH:

Rio Tinto is poised to cut several hundred jobs from its iron ore division in Western Australia, weeks after iron ore boss Andrew Harding sent a memo to staff warning of a “degree of urgency” to quickly achieve deep cost cuts and maintain its mantle as the world’s lowest-cost exporter to China.

Further deep cost cuts at Rio have been well flagged, and the miner is putting the heat on high-cost players around the world by drilling its world-beating production costs even further down. It exited the December quarter with cash costs just under $US17 a tonne.

Rio declined to comment. But Fairfax Media understands several hundred jobs are set to be cut.

 

Comments

  1. It’s hard to shake the feeling that the combination of savage cost reductions and falling commodity currencies will drag key commodity prices far below what consensus believes possible.

    • @ flyingfox

      I’m further South than Mandurah and it is still full steam ahead here. We are similar to large parts of Mandurah (tourists, oldies, fifo’s) so I would be surprised if it is quite as bad as you suggest.
      My own view still remains that until twiggy (the face of wa iron ore) comes out and announces wide scale ‘fmg staff’ job cuts the wa populace will remain in its deluded bubble.

      • @Bill

        Been nowhere near the place so I am no expert. All I was suggesting to The Pat is SQM numbers may not reflect what is happening on the ground as per Stomper’s suggestion.

        I know that things in Gladstone turned pretty quick and this was before oil tanked.

      • @EP

        You are much closer than I am to that but it is what I hear. I am just continually surprised that Twiggy and Nev have been able to delay as long as they have whilst RIO and BHP make the cuts. The real bogans I know are at FMG and are still very deluded.

    • Glad to see the highlighting of the mandurah region.

      In response to the dubious 2.1% posted by patrician I’ll say that overall he is correct.

      Mandurah has the “wealthy” end thats tailspinning and the old “poor” area where the market gained huge momentum due to the influx of wealth into high end houses. (Local construction jobs and the average joe borrowing as much as possible.)

      The wealthy area is weird mix of skilled FIFO , retires and businessmen etc from perth buying holiday homes for their powerboats.

      The ramifications I feel from Mandurah high ends decline is woven into just about every suburb south of perth. Many may opt to sell up in perth and ride thru the storm in mandurah (retire), this will add a lot of supply as holiday homes are turned into homes. This is of course is my personally belief and a story I’ve heard often.

      • Mandurah surrounding areas are overwhelmingly working class people doing the classical thing of loaning every cent from banks to buy any form of shelter.

        There are a lot of flow on effects from further declines in the wealthy side of town. Tradie jobs are paramount.

        A lot of fringe areas of perth suburbs seem to only exist/survive because land is getting released a little further down the road (trade jobs) , its a giant ponzi but what happens when there’s a glut in mandurah?

        Remember mandurah isn’t a mining town like Gladstone, it’s connected to perth suburbia its chief product is houses followed by coffee shops.

      • Mandurah is supported by a host of newbies from the Mining Boom and the Wheatstone-Gorgon projects 2005-2012.

        I worked with these people in engineering and FIFO, many of whom bought 2 or more properties in this area.

        The bulk of engineering works is now done and dusted now and the likes of Worley, GHD, AMEC, Jacbos-SKM are now skeletons of their former selves.

        Engineering services is dead in WA, construction is 60% done with Gorgon & Roy Hill holding the fort.

        The real estate demographics show this. The (former) engineering office workers generally live in around the city, East Perth and Vic Park areas for easy access to the Terrace in Perth. These areas have taken a massive hit in the vacancy rate doubling in the past 14 months.

        Locals that have made some $$ and have FIFO jobs (particulary construction) have bought in places like Mandurah. So with the remaining balance of the construction projects left over, the data won’t move much. Give it another 12 months to 2 years when the remaining projects come to an end. Then you will start to see the same effect that’s now happening in East Perth and surrounding areas.

        I know many former colleagues that have homes in Mandura area and now live in QLD and NSW. They have rented their homes out in order to move and get work interstate.

        Also there is a host of FIFO workers from WA that are working on the other side of the paddock in QLD on the QCLNG and APLNG projects…again, once these projects wrap up on the coming 12 months, you will see the affects on the real estate market in WA.

  2. Glencore, Coal division, QLD and the Hunter will be next, another coupla hundred to go.I was surprised they restarted after the Xmas break, WW

    • There’s room though. During investment boom hundreds of positions created operatively and administratively. As construction/expansion phase winds down just don’t need roles that oversaw that phase.

      Dig and deliver.

      • Yes, which is why the biggest miners will see earnings hold up relatively while yet, but we are now at the point where any improvements in corporate bottom lines mostly come at the expense of the local economy.

      • Yep. That’s true. Rio’s own corporate red tape, puts both government and green tape to shame.

        Word is tho – that BHP overdid it and now have a heap of contractors in roles made redundant, (contractors as you can re-fill a role made redundant for 1 year).

        So it will be interesting to see how far they can go.

      • Just reread the headline.

        I don’t think it will be measured hundreds, BTW and I’m not being optimistic either.

      • Commodity prices are determined by the cost of the highest cost marginal producer.

        Sadly, faced with the choice of either bankruptcy or savage cost cuts, mining salaries will be set the same way.

  3. About a week back I was talking with a friend in Monadelphous, The basic message is that both Rio and BHP are delaying everything and forcing the engineering companies to absorb all sorts of costs that were in earlier times charged out. Interestingly I didn’t get a sense of panic although its clear that all is not well at Mona. From my experience Downsizing/rightsizing a business is a much more difficult task then growing a business, I’d say it also requires a different mind set.

    For me this whole structure of many smallish engineering companies providing competitive services to a handful of huge mining multinationals was broken before it started. These services companies are now price takers working for price takers in a declining global market place for commodities. That’s about the ugliest business model I could imagine. As much as they might try to view things through rose tinted glasses the reality is grim especially for new comers with their bloated cost structures. Makes me wonder who, if anyone will buy up the service contracts as the engineering firms fold.

    Looks to me like the whole Samsung mess at Roy Hill is the future for all mining service players.

    • Rio Hill? Well, you never know 😉

      It’s just the commodity cycle writ large. Commodity producers now price takers and down the chain it flows. You know the saying, when it’s good, it’s very very good…

      • Exactly, those service providers have had an extraordinary run for 3-4 years. My my how the tables turn. Time to sharpen their pencils.

    • Traditional contract/consulting Engineering is a shit business model.- only engineers would fall for it! I did, Fixing it now.

  4. My cousin is an auto sparky on the Roy hill site. They had a meeting this week about the cost cutting a the fact there will be layoffs.

    • [email protected]

      tell cuz to keep his wits about him.
      they’re cowboys in construction there.
      A feller can end up brown bread real quick.