Japanese trading giant Mitsui says Australia’s lagging productivity fails to justify its high mining wages, while tipping a modest rebound in heavily depressed iron ore and coal prices by the end of the year.
Mitsui, which has ploughed $14 billion into investments in Australia in the past decade, also forecast the huge iron ore supply glut would likely correct by the end of the decade, possibly as early as 2017.
Mitsui Australia boss Yasushi Takahashi stressed the importance of executing deeper cost cuts at Mitsui’s Australian operations, which include iron ore, coal, and liquefied natural gas.
“It’s an inconvenient truth but Australia’s high wages are not supported by an equally high productivity,” Mr Takahashi said. “The biggest subject we are tackling right now with our joint venture partners is to improve productivity to match up with high costs.”
He pointed to prohibitive labour costs at Australia’s coal mines. Labour made up about 25 per cent of on-site coal mine costs in Australia, compared to 10 to 15 per cent in other key mining exporters, like China, the United States, South Africa and Indonesia.
Australia’s average mining wage was $US122,000 ($138,000), more than double that of the US. “That is a good thing we are seeing high wages in the most liveable country in the world,” he said.
“If that’s sustainable that’s fine. But one concern is, is it really sustainable?”
Mitsui is in long-running iron ore joint ventures with both BHP Billiton and Rio Tinto in the Pilbara region of Western Australia.
The Japanese company said the 40 per cent decline in iron ore spot prices to about $US80 a tonne this year and dramatic falls in coal prices were sharper than expected. At the end of the year, the two bulk commodities would start to regain some of the ground lost, he said.
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