Mining giants BHP Billiton and Rio Tinto have warned the combination of high costs, high taxes and the strong Australian dollar has put a “vice-like grip” on the $60 billion coal industry that will force further mine closures and job losses this year.
About 12,000 jobs have been cut from the sector over the past two years amid a string of mine closures and delays to projects by companies ¬including BHP, Rio, Glencore, Vale and Peabody Energy.
BHP global coal president Dean Dalla Valle said there would be “difficult times ahead in a period of such oversupply”, particularly given many operators are not making money at ¬current depressed prices.
“You will see the industry adjust itself, shake itself out. You are going to see more exits from the market.” While both miners remain confident in the long-term outlook, they predict a brutal period ahead for the industry as prices remain under intense pressure.
The contract price of premium hard-coking coal has fallen to $US120 a tonne in the June quarter from $US330 a tonne in 2011, while thermal coal prices have dropped to $US74 a tonne on the spot market from $US125 in mid-2011.
Miners have been struggling to keep their Australian coal operations profitable amid deteriorating prices, surging costs and a high Australian dollar.
BHP and Rio are among the lowest-cost producers in the country and operate their businesses at a profit.
Rio energy chief executive Harry Keynon-Slaney said there had been a recent shift in attitude to cost cutting in the industry and Rio’s leadership teams had been “prepared to kill sacred cows” – like freezing salary increases.
“The big established and high-quality resource bases where there are efficient and effective operations will have to continue this relentless cost drive – they will probably survive,” he said.
“But there are going to be some operations that are challenged.”
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