BHP confirmed it will make about 300 workers redundant at its Western Australian iron ore operations, covering the South Flank, Mining Area C, Newman and Jimblebar mines in the Pilbara. The four operations employ about 16,000 people in total, so the cuts are roughly 2 percent of that workforce, concentrated in operational and maintenance roles. The company said it would seek to redeploy affected staff elsewhere in the business where possible.
The driver is a pincer of price and cost. Iron ore prices have fallen about 14 percent since the start of the year, and Singapore futures touched a two year low below $90 a tonne on Thursday. At the same time fuel, shipping and operating costs have risen. BHP’s August full year report said the cost environment had shifted materially because of higher energy prices, and Rio Tinto’s quarterly report this week put the diesel cost increase in the Pilbara at about $1 a tonne.
Union response was immediate, with the WA Electrical Trades Union questioning whether the redundancies are necessary and raising consultation concerns, according to ABC reporting carried by Mining.com.au. BHP expects to produce up to 298 million tonnes of iron ore in its current financial year, against about 366 million tonnes a year at Rio Tinto.
The cuts are small against the Pilbara workforce but significant as a signal. BHP sits at the bottom of the global iron ore cost curve, and its last Pilbara reduction of this kind was a division wide trim in 2014. Cost action at BHP usually means the price outlook is expected to stay weak long enough to justify restructuring, not just deferring spend.