Miners: More Pain Before Gain – by Anthony Fensom (The Diplomat – December 2, 2015)


Asia’s resource sector has felt the pain of falling prices in 2015, forcing job cuts from Indonesia to Australia and destroying billions of dollars of market value. Fortunately for miners, the longer-term outlook appears brighter, although more pain is expected in 2016.

A recent report by BIS Shrapnel predicts Australia’s miners will shed another 20,000 jobs over the next three years, on top of the 40,000 jobs lost since the peak in investment during the mining boom as miners adjust to the post-boom hangover.

Meanwhile in Indonesia, the coal slump has reportedly caused “the majority of coal mining companies in Indonesia to stop operating,” with up to 80 percent estimated to have ceased production as of August 2015.

The pain has even been felt in resource-poor Japan, where the nation’s major trading houses have suffered falling profits after making aggressive investments during the mining boom. According to Reuters, top-ranked trader Mitsubishi recently postponed its forecast of a recovery in prices to 2018 from 2017, sparking a switch in focus to non-resource investments.

According to Thomson Reuters GFMS, the world’s top 10 miners have lost around half their market value over the past 12 months, wiping out an estimated $280 billion.

“The clock has turned back on commodity prices and revenue to levels last seen in 2008 and 2009, while over the same period debt on the combined balance sheets of the 10 miners is more than 50 percent higher,” GFMS was quoted saying by MiningNews.

Speaking at the Mining 2015 conference in Brisbane, Australia, Westpac economist Justin Smirk admitted that the Australian bank had got its forecasts wrong on China, the world’s biggest resource consumer and producer, which was now in a “cyclical slowdown with a structural overlay” as it struggled to rebalance its economy.

“This year is the first since the 1990s in which industrial production in China has actually declined,” he said in his November 11 presentation, noting falling steel output, a large property overhang in tier two and tier three cities outside the major centers, and faltering export growth.

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