Iron ore price flirts with key $100/T level on firm demand, China stimulus hopes
Analysts say near-term demand for iron ore remain strong, supporting prices.
Between 50,000 and 75,000 mining jobs will be lost in Australia over the next couple of years as the industry’s US$427 billion (A$450bn) investment on new capacity slows, research by the ANZ bank released on Wednesday shows.
According to the bank, the cuts will occur because the sector is switching from the job-heavy construction stage to the operational phase, which requires fewer workers.
Falling commodity prices, with both iron ore and coal tumbling this year, will also affect job creation and could see more positions go due to mining companies and suppliers efforts to cut operational costs.
Earlier this year Glencore (LON:GLEN) shut part of its Ravensworth coal mine because the operation was uneconomical. Brazil’s Vale (NYSE:VALE) followed closing its Integra Mine Complex for the same reasons. And they’re not alone, cut backs are going on throughout the whole sector.
This ANZ chart shows the strong relationship between resources investment and job creation. Taking into account resources extraction, which is increasingly becoming a volume game, resources investment, and commodity prices, the estimates are alarming.
By 2016 the bank expects resources investment (the blue line) to drop from about 7.5% of GDP to 4% — almost half in nearly three years. The yellow line, which shows employment related to resource investment, implies it will follow the blue line.
As a result, the bank’s economists say there will be little improvement in the nation’s 5.8% jobless rate.
ANZ senior economist corporate and commercial, Justin Fabo, was quoted by The Australian saying that weaker than expected commodity prices would likely increase the risks to more job losses as mining firms seek to cut costs.
“So we think the unemployment rate will be in spitting distance of six percent over the next 12 months, and for improvement after that to be gradual,” he said.
The Australian Workforce and Productivity Agency estimates there are 263,000 jobs in the resources industry, which represented an 80% increase over five years.
6 Comments
Mark Harder
One thing is certain: Prices of resources increase over time. Look at Pt : Despite huge price increases since catalytic converters were mandated, no cheaper substitute for Pt has yet been found. So I think the mushroom cloud is a tad overstated, don’t you think?
Stu H
How will the price of Platinum help Australia?
Michael H McGrath
This is a very alarmist piece of news drawn from a single portion of the research. How about reporting on the full breadth of the ANZ research, and draw on additional resources? This piece may then resemble a more robust and balanced observation, of someone else’s homework.
lobozapato
60% of Aussie workers do not contribute to GDP?
the chart raises a peculiar, if unintended conclusion: If one looks at the left y-axis, it says 7% of GDP is created by 3% of the workforce in Australia (=right side y-axis). Extrapolating the left y-axis (=GDP) to 100%, then the right employment axis would be about 40%. The conclusion would be that 40% of the Australian workforce generates 100% of the GDP. Since the remaining 60% of the workforce is not contributing anything to the GDP, once suspects that 60% of Australian employees work for the government, perhaps?
Mick Taylor
Travelling from East to West coast quite a lot over the last 15 years, for work and pleasure.
The one thing that bites me the most is the excessive price difference on goods, particularly BEER?? It’s now a $5:00 gap?? Chatting with various locals and pointing out to them that a pint can cost anywhere from $10 – $15, people nearly falling off chairs.
It’s bloody absurd by the big brewers to be RIPPING AUSTRALIANS off like this??
O.K. not to mention just about everything else, there has always been a difference
but the gap now is frightening! All because someone said years ago it’s a MINING BOOOM,
so its very common to hear, you’ll be right, your in the mines… It’s a boom you can afford it…
Hog Wash! We’ll wait till the pubs empty, shops dry out, streets abandoned and towns ghosted before anyone will pull in the reins on these greedy bastards.
PEOPLE THERE IS NO MINING BOOM, IT’S OVER, FINISHED, GONE. NOW IT’S BARELY STEADY, SO LOWER YOUR BLOODY PRICES FOR SUSTAINABILITY..
JMar
The title is misleading…construction jobs are being lost, NOT mining jobs!
“According to the bank, the cuts will occur because the sector is switching from the job-heavy construction stage to the operational phase, which requires fewer workers.”