I wrote yesterday how the slump in coal prices, which have more than halved since 2012, is spreading beyond the affected miners onto other players in the supply chain.
Yesterday, it was rail freight operator, Asciano, that was in the firing line, with coking coal producer, Anglo Australia, seeking to renegotiate its rail contracts to remove take-or-pay provisions, which requires a miner to pay for rail capacity even if they don’t use it and makes it difficult for miners to reduce production levels as prices falls.
Now, Business Day has reported that BHP has pulled back production at its Goonyella coking coal mine in Queensland in a bid to maintain profitability. And in the process, engineering services company, Downer EDI, has been told that “its contract for pre-stripping – which is the first step in preparing new mining areas within existing operations – at Goonyella Riverside would be terminated in September, almost two years ahead of its June 2016 expiry.”
Welcome to the new normal, whereby the ongoing falls in commodity prices will increase pressure on miners and force them to slash their operating costs. In turn, all parties in the supply chain – from mine workers to logistics – will be hit, which alongside the expected sharp falls in mining investment, will adversely impact both employment and incomes across Australia’s mining communities and beyond.
