Australian mining industry seeks answers to labor shortage
SYDNEY / TOKYO – Australia’s iron ore miners face a severe labor shortage, leading to cutbacks in production and shipments as they compete with other industries for talent while facing the constraints of coronaviruses.
The problems are pushing prices up and clouding export prospects, especially to resource-hungry China.
Anglo-Australian mining giant Rio Tinto reported a lackluster second quarter on Friday, saying iron ore production fell 9% year-on-year to 75.9 million tonnes. Its production from January to June was also 5% lower than in the first half of 2020.
COVID-19 related restrictions “have limited our ability to access additional people, particularly in Western Australia and Mongolia, to provide operational improvements or maintenance initiatives and to expedite projects,” said Managing Director Jakob Stausholm in a statement. Western Australia has some of the world’s largest reserves of iron ore.
The company left its full-year shipment forecast intact – between 325 million tonnes and 340 million tonnes – but Stausholm said it expected the figure to be “at the bottom of the range.” .
Rio Tinto is not the only one among mining players to meet its workforce challenges.
Mineral Resources, an iron ore mine operator known as MRL, has faced a shortage of truck drivers due to travel restrictions linked to COVID-19. âThis shortage means that on average, a transport capacity of around 10,000 [wet metric tons] per day otherwise available to MRL was inactive, âthe company said in a statement earlier this year. MRL has lowered its shipping forecast for the year ended June to a range of 17.4 million tonnes to 18 million, more than 10% below its previous target. .
BHP announced in May that it would hire 200 apprentice train drivers, equivalent to 45% of its current driver pool.
Australia is the world’s largest producer of iron ore, supplying 53% of global exports in 2020. The country enjoys strong global demand for its high-quality iron ore, especially from Chinese steelmakers who are looking for the material from Down Under as it helps reduce carbon. carbon dioxide emissions during the manufacture of steel.
Western Australia, home to 99% of the country’s iron ore production, is home to around 147,000 workers in the resource industry spanning gold, copper and liquefied natural gas. But “there is currently a significant shortage of workers, with the potential for a shortage of up to 33,000 workers,” according to a report from the Western Australia Chamber of Minerals and Energy released in late June. The peak of the shortage is expected to occur in the July-September 2023 quarter.
Iron ore producers are trying to maintain shipping levels by tapping into inventory and other measures. But the labor shortage is unlikely to abate anytime soon.
Indeed, the fight for talent is intensifying with the eastern states of Australia, where large cities such as Sydney and Melbourne are located. A boom in infrastructure construction is now underway in the southeast.
Typically, mine workers in Western Australia travel to the state to work a few weeks and return home to urban areas to take days off. But more are choosing to work in the east near metropolitan areas instead of working away from their families in places like Pilbara, a sparsely populated iron ore mining mecca where summer temperatures exceed 40 degrees Celsius.
State and national border closures intended to stem the pandemic have made travel difficult.
Meanwhile, costs are rising, in part because of wage increases. Fortescue Metals Group in May raised its planned capital spending for the Iron Bridge mine project to $ 3.3 billion to $ 3.5 billion from $ 2.6 billion, citing higher materials as well as prices equipment and labor restrictions.
These prices are expected to push iron ore prices further from current high levels. The international benchmark for spot prices to China published by S&P Global Platts hit a record for the first time in about 10 years at the end of April. It was hovering between $ 220 in early July, more than double the level a year earlier.
“The labor shortage will limit iron ore supplies, and this will support the market,” said Naohiro Niimura of Market Risk Advisory, a commodities consultancy in Tokyo.