By Scott Patterson And John W. Miller
The world's biggest mining companies are hemorrhaging jobs as
they downsize to cope with a prolonged China slowdown and a
commodity-price slump that they no longer expect to end soon.
Anglo American PLC, the U.K. mining titan, on Friday announced
the most dramatic jobs cut yet in the ailing industry, saying it
would lop off 53,000 employees over several years--including 6,000
cuts in corporate offices that amount to $500 million in savings.
That would result in a 35% reduction of its current workforce of
151,000, though much of it would come through the sale of mines,
not direct layoffs.
"We're looking at every dollar and pulling everything back,"
Anglo-American Chief Executive Mark Cutifani said in a presentation
of the miner's first-half earnings results to investors Friday.
"It's a constant process driving out costs."
A broad two-year slump in commodity prices has eliminated tens
of thousands of mining-related jobs across the world, from gold
mines in South Africa and steelworks in the U.S. Midwest to
producers of uranium in Australia and iron ore in Canada.
In the U.S. alone, mining-sector employment declined in June to
its lowest level in five years, according to the Bureau of Labor
Statistics. In Australia, where much of the global mining industry
is based, mining employment in the June-ended quarter was down 13%
from a year earlier, according to government figures.
Too much production of commodities, spurred by China's red-hot
industrial growth in the past decade, has been blamed for much of
the mining industry's pain since 2013. Now, miners face a "second
meltdown phase" driven by ever-worsening demand as China's economy
cools, said Jefferies analyst Christopher LaFemina in a note this
past week.
More job cuts could be coming, with copper and gold hitting new
multiyear lows on Friday after significantly weaker-than-expected
manufacturing data was released in China.
"We're prepared to take steps to respond to the weaker economy"
globally, Richard Adkerson, chief executive of copper miner
Freeport-McMoRan, Inc., the U.S.'s biggest mining company, told
analysts Thursday.
Workforce reductions figure prominently in the mining sector's
push to cut costs amid the deep downturn in commodity prices driven
by China's economic deceleration.
Anglo and other big miners, such as London-based BHP Billiton
Ltd. and Rio Tinto PLC, are also restructuring organizations that
grew quickly when the world's most populous country was gobbling up
commodities. Anglo is trying to sell more than a quarter of its
assets, while BHP recently spun off more than a dozen mines into a
separate, public company called South32. Pittsburgh-based resources
company Consol Energy Inc. said it would no longer guarantee health
insurance for retired workers.
"They're all doing it across the mining world," RBC Capital
Markets analyst Des Kilalea said. "They're clearing out the
infrastructure."
Mining companies are being forced to shed costs after years of
rampant spending on new mines and ramped-up production to feed the
world's appetite for industrial metals during a boom that started
in the early 2000s. By 2011, prices for the steelmaking ingredient
iron ore had shot up to $190 a ton, with copper hitting a record of
close to $10,000 a ton and gold exceeding $1,800 an ounce.
Miners raced to snap up mining assets, spending billions amid
expectations that a "supercycle" boom would continue indefinitely.
Anglo-American bet $8.8 billion on Minas-Rio, a Brazilian project
it continues to develop despite crumbling iron-ore prices. BHP
Billiton in 2011 shelled out $12 billion for a U.S. shale-gas
company--which is now tagged for a $2 billion write-down. Rio
Tinto's $6.2 billion copper and gold mine in Mongolia has
encountered ballooning costs and frequent roadblocks to
production.
But in 2011, just as miners were building up huge supplies,
China's soaring growth began to cool, leading to a slump that
continues with no end in sight, according to analysts and
executives.
The markets for what the big miners sell sagged again on Friday.
Three-month copper futures in London fell to $5,191.50, their
lowest level in six years. Iron ore was trading for about $50 a
ton.
The damage has touched nearly every mining company.
South African gold producer Lonmin PLC said Friday it would cut
6,000 workers over the next two years. So far this year, BHP has
eliminated hundreds of jobs linked to Olympic Dam, its giant
copper, gold and uranium mine in South Australia. Australia-based
Fortescue Metals Group Ltd., the world's fourth largest iron-ore
exporter, on Thursday didn't rule out further job cuts in
announcing plans to cut costs in the year ahead by nearly as much
as in the two past fiscal years combined. Swiss miner Glencore PLC
plans to cut several hundred jobs at its South Africa coal
mines.
In the U.S., the coal sector has been hit for reasons that go
beyond China. It has been battered by competition from inexpensive
natural gas, tougher environmental regulations and a sluggish U.S.
economy. With prices off nearly a third since 2011, every
significant U.S. coal company has cut jobs and a half-dozen have
declared bankruptcy, prompting a crisis that has destroyed local
economies throughout coal country, especially in Appalachia.
As coal output in the U.S. has dropped 15% since 2011, the
number of coal miners employed in the country has shrunk to around
70,000 from over 90,000.
The moves come as oil companies and their service
contractors--roiled by a similar price collapse in the crude
market--have shed tens of thousands of jobs and moved to reshape
their operations for what could be a long period of soft commodity
prices.
None of the big diversified miners has suffered as much as
Anglo, which Mr. Cutifani took over in 2013 with high hopes of
turning it around. Instead, the company's profits have fallen
further. On Friday, it posted a $3 billion net loss for the first
half of 2015, and its share price, which has hovered at or near
13-year lows in recent weeks, fell 3.5%.
Anglo said it would need to cut $1.5 billion in costs over
several years to become profitable. The job cuts are among the most
drastic measures Mr. Cutifani has announced, as he looks to make
the world's fifth-largest miner by market valuation more efficient.
Some of that is dependent on his ability to sell some
mines--something he has had trouble doing.
Rhiannon Hoyle contributed to this article.
Write to Scott Patterson at scott.patterson@wsj.com and John W.
Miller at john.miller@wsj.com
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