As the mining industry moves deeper into the production phase of the resources boom and away from investment, the ANZ bank is forecasting that between 50,000 and 75,000 jobs will disappear over the next few years.
“We expect 50-75K jobs, at most, remain to be shed across the economy over the next couple of years as the resources sector continues to transition from the investment phase to operational phase,” ANZ economist Justin Fabo said.
Falling commodity prices, with both iron ore and coal tumbling this year, will also affect job creation and could see more positions go as mining companies and suppliers attempt to cut operational costs.
Commodity prices impact mining companies profit margins, can affect employment levels and see whole operations shut down. Earlier this year Glencore shut part of its Ravensworth coal mine because the operation was uneconomical, and they’re not alone, cut backs are going on throughout the whole sector.
This ANZ chart shows there’s a strong relationship between resources investment and job creation. Taking into account resources extraction which is increasingly becoming a volume game, resources investment, and commodity prices, the predictions are scary.
By 2016 the bank expects resources investment (the blue line) to fall from about 7.5% of GDP to 4%. A drop of almost half in about three years. The yellow line is employment related to resource investment and the implication is it will follow the blue line.
The drop is mostly attributed to mines moving into production, a phase which requires less labour compared to investment stages when operations are being developed. This chart when coupled with the drop in job ads for engineers chart below suggests employment related to resources investment has been falling since the boom and indicates the weakness could continue for some time.
“Iron ore projects in Western Australia require, on average, one worker during the production phase for every two or three workers directly employed during the investment phase (but the ratio can vary markedly project to project),” Fabo said in his report.
He estimates resources investment has already dropped at least 10% since its peak in late 2012.
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