Australia is globally recognised as a picturesque tourism destination; however, this outward prosperity benefits greatly from the success of our mining and resources sector. We are currently ranked number one in the world for economic resources of vital minerals like gold, iron ore, lead, and nickel—but this may not be the economic jackpot it once was (Ministers for the Department of Industry, Science and Resources, 2024). After a sharp downturn of about 40% between 2022 and 2023, global commodity prices have continued to decline at a concerning rate (The World Bank, 2024).
An Unexpected Response to Increasing Global Demand
The 2022 price drop was largely caused by the world’s increasing need for critical metals. As although the skyrocketing demand was generating higher profits, it was also encouraging more producers to come online. This growing number of producers then created a significant oversupply, particularly in cheaper markets, which meant that product volume outpaced global needs (Kaine, 2024).
Also, the declining prices were exacerbated by unpredictable events such as recent geopolitical tensions (World Bank, 2024), China’s cooling economy, and the lack of growth in electric vehicles.
Mining Company Giants Take Steps to Mitigate the Impact
Australia’s mining sector has been significantly impacted by the collapse in the price of rare minerals and metals, with many companies tightening their belts and reducing staff numbers. The scale is staggering; in one state, close to 1000 jobs were cut from December 2023 to February 2024 alone (Kaine, 2024).
BHP has let go of around 100 contracting staff within their West Musgrave nickel and copper project—approximately 25% of people on site (Cossins-Smith, 2024). While Santos laid off 200 staff across their entire operations, within both their internal and contracting teams. These mining company giants have blamed slow project approvals for delaying growth activities—but this is still a direct effect of the diving mineral prices (Shepherd, 2024).
What Does the Future Hold for Australia’s Mining Industry?
There could be some tough times ahead for mining companies as they look to navigate this pressure period. David Lamont, BHP’s outgoing CFO, explained the scale of the impact: “To put that into context, 30% of the Australian nickel market has gone offline and another 30% is under pressure.” (Reuters, 2024)
And nickel is just one element of a wider trend, with no change on the horizon. The World Bank forecasts a further decline of 3% in global commodity prices in 2024, with another 4% predicted in 2025 (World Bank, 2024).
With this continued downturn, further redundancies are inevitable. Companies will become even leaner across both their white-collar and blue-collar workforces; the remaining teams left to absorb the workload, stretched thin across an ever-expanding task list.
Streamlining Processes to Withstand a Turbulent Market
Although businesses could soon have access the government’s newly announced subsidy support for mining companies (Cossins-Smith, 2024), this is only a stop-gap measure. In order to navigate the unstable circumstances—with reduced workforces and limited funds—companies may need to evaluate their operational efficiency.
Digital systems have become a standard across most industries, but some mining companies continue to avoid drastic change; hesitant to move away from tried-and-true processes. Although caution makes sense in such a hazardous industry, other areas can suffer as a result—manifesting in a 28% drop in global productivity over the last decade. (Nadig, 2023)
However, Australia’s mining industry has always been ahead of the curve.
With vast autonomous operations in the Pilbara and the government funding a range of projects, our industry fosters innovation and invention. (Nadig, 2023) And if more technological solutions are adopted, overburdened teams will be able to further consolidate those traditionally time-consuming processes.
Kinatico has a range of digital systems that can improve companies’ capabilities and enable agility during this uncertain time. Get in touch with our team of experts for more industry-specific insights and advice on which systems suit your company’s needs.
References:
Cossins-Smith, A. (2024, March 19). BHP cuts contractors at Australian nickel operations amid price crisis. Mining Technology. https://www.mining-technology.com/news/bhp-cuts-contractors-australian-nickel-operations/
Cossins-Smith, A. (2024, April 23). The nickel price crash and the road to recovery in Australia. Mining Technology. https://www.mining-technology.com/features/nickel-price-crash-australia-crisis-recovery/?cf-view
Kaine, E. (2024, February 1). 1400 jobs on the line amid devastating crisis. News.com.au. https://www.news.com.au/finance/business/mining/1400-jobs-on-the-line-amid-devastating-crisis/news-story/ca67621dad503e971a08c9852b006d18
Milne, P. (2024, April 29). WA job losses: 330 more nickel jobs go, this time at Ravensthorpe. WA Today. https://www.watoday.com.au/national/western-australia/wa-job-losses-330-more-nickel-jobs-go-this-time-at-ravensthorpe-20240429-p5fnel.html
Ministers for the Department of Industry, Science and Resources. (2024, March 5). New report shows Australia’s critical minerals are leading the way [Press release]. https://www.minister.industry.gov.au/ministers/king/media-releases/new-report-shows-australias-critical-minerals-are-leading-way
Reuters. (2024, March 18). BHP cuts contractors at Australian nickel project amid price slump. https://www.reuters.com/markets/commodities/bhp-lets-workers-go-australian-nickel-mine-amid-price-slump-2024-03-18/
Shepherd, B. (2024, May 15). Gas giant Santos lays off about 200 staff, most based in Perth. ABC. https://www.abc.net.au/news/2024-05-15/santos-lays-off-200-workers-based-in-perth/103852218
The World Bank. (2024, April 25). Global Commodity Prices Level Off, Hurting Prospects for Lower Inflation [Press release]. https://www.worldbank.org/en/news/press-release/2024/04/25/commodity-markets-outlook-april-2024-press-release
