How does the price of iron ore affect mining jobs and what does the future hold?
In this article we discuss the Australian iron ore mining industry, how the price of iron ore affects jobs and what to believe today and in the future.
At iMINCO, one of our aims is to show people who are thinking of a career in the mining industry that research and knowledge plays a big factor in job success. This research is not justáfor the initial stages of looking for work and learning about the mining company that is advertising the job, itáremains importantáfor the entire length of employment.
Let’s explain that a little, so you understand where all of this is coming from.
It’s no secret that over the last few years, the Australian iron ore industry has re-invented itself on the back of an insatiable demand for iron ore. China was the main user of the raw material that was being dug out of the WA Pilbara desert at lightning speed and shipped overseas.
As with most things in life, circumstances change; and if you are in business and your customers stop buying your product, then it gets tough. Basically, what has happened over the last 12 months or so, iron ore customers have said we don’t really need so much of what you have because there is so much of the stuff available, and we are not going to pay $140 a tonne any longer (previously over $300 a tonne).
Press the big red ‘warning’ button
If that wasn’t enough to rattle Australian mining companies who had sunk billions of dollars into developing iron ore mines, the price that dependent countries were prepared to pay dropped like a brick from aáten-storey apartment building. To the horror of mining companies, the iron ore price plummeted to under $80 a tonne, a 5-year low. It was time to press the big red ‘warning’ button, which continues to be pressed today.
So here we have a tremendous tale of fortunes being made and lost. Of ordinary Australian folk who packed in their mundane, low-paying jobs and headed West to find their fortunes in iron ore mining.
What are the real facts behind the iron ore price fluctuation?
It’s no secret, when the price of iron ore drops, mining companies profits are squeezed to the max. When cash-flow and profitability are low, the ‘bean-counters’ turn their focusáto cost-cutting measures. In an effort to slow the cash losses, the first item on the agenda is the labour cost to the mining company. This means, jobs are on the chopping block from the minute there is a price drop in iron ore in Australia.
This sends a wave of uncertainty through the entire workforce as rumours of lay-offs seem to escalate, which affects the whole morale of a mine site – and with good reason.
The hierarchy of a mining operation has many levels and it helps to understand the basics of how it all works. Understanding how a mining company is put together leaves clues as to how to prepare for the future and in some ways try to insulate yourself from being in the firing line when job cuts are announced.
Understanding a simple mining company structure
Mining Project > Investors > Mining Company > Mining Contractor (Lead) > Sub-Contractors > Workers
As we can see, there needs to be a project for investors to sink their money into, in the hope of getting some sort of financial gain from risking their cash.
The mining company’s role
The mining company then has to put itself behind the project and more often than not, it will hire a specialist mining contractor to take charge of running the mine.
The lead contractor’s role
The lead contractor will the use a mix of its own workforce and also sub-contract various mine site operations where they do not have the expertise themselves.
The sub-contractor’s role
The sub-contractor may also use its own network of sub-contractors to carry out work on their behalf. Typically sub-contractors may hire small companies which have their own workers. Many of these smaller contractors may be owner-operators who provide civil construction, plumbing, electrical, piping andámaintenance roles; as well as many, many more.
This creates a sort of spider’s web of workers who are all dependent on one thing; and that is the ability of the project to be successful as it is put under pressure from various sources, such as a drop in the price its customers are prepared to pay for the iron ore it is mining.
Looking at this basic example, we can see how mining jobs can be affected by the ripple effect of lower commodity prices. When iron ore prices drop, you had better be aware of how that can cause reductions in the workforce, literally overnight. The trick, for people working in the iron ore industry, is how to stay ahead of these price fluctuations and prepare a plan to shield themselves from the effects of price drops in iron ore.
Defend your mining job using knowledge
There’s no easy answer to that one, there are many factors at play. However, one of the biggest weapons anyone can have in their arsenal is the power that is yielded by possessing a high-level knowledge of the mining industry.
This includes things like understanding the intricacies of commodity prices. This of course is not for everyone to get involved with. Many people are simply happy to turn up for work, do their shift and head off home or back to the donga and there is nothing wrong with that.
The point here is, if you know when a storm is approaching, you can prepare for the effects and either ride it out or move away from it.
How to build your mining knowledge
The internet is jam-packed with news and information about Australian mining companies, mining projects and jobs. The problem is, there is so much information, it’s difficult to work it all out. What’s more important, is to be able to understand that information, then act on it.
With too much information, it can be difficult to keep reading, so many people just give up.
iMINCO spoke to thousands of its subscribers and has tailored iMINCO Project News to their requirements. The weekly newsletter is a free service and has about 23,000 subscribers. It’s a great way to learn about the mining sector in Australia, find out who is hiring, what the best training courses are and where to find them.
Take iMINCO Project News for a test drive today! What have you got to lose?