Coal contraction continues

The big economic news for Queensland today was the announcement from BHP Billiton of a reduction in coal mining jobs of 700 in its Central Queensland operations, as the viability of some operations have been challenged by lower coal prices (see 700 Queensland coal mining jobs go at BHP’s BMA joint venture). This follows a series of coal mining job cuts this year, which appear to have been reflected in the August ABS employment by industry data released last week (see the chart below). While the plunge may be exaggerated due to sampling error in the Labour Force Survey, there is no doubt coal mining employment is falling significantly. The Premier is right to talk positively of the employment potential of Galilee Basin projects, but I think the time-frames for these projects means that any big employment boost is a few years away yet. In the meantime, there’s not much cause for optimism – MacroBusiness is particularly pessimistic (Coal mining job losses roll on) – and the Queensland Treasury might have to consider revising down its coal royalties forecast of $2.1 billion in 2014-15.

Coalminingemployment

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4 Responses to Coal contraction continues

  1. Jim says:

    Jobs losses in the mining sector should be a surprise to nobody. What we have seen in the past couple of years is a transition from the mine development phase (higher employment) to the mine operation phase (lower employment) for the mining develop cycle.

    I’d bet there is no positive correlation between recent job losses in mining and production. I’d guess it is probably slightly negative. Reading any causality into this is risky duet where we are in the mining development cycle.

    If I was Treasury, I’d be more concerned about changes to China’s coal quality requirements hitting Qld coal sales. Marginal (i.e. higher cost) mines may struggle to secure commercially viable contracts with Chinese buyers in the future.

  2. Gene Tunny says:

    Jim, I agree regarding the impact of the transition form development to operations, but from what I can tell these are operational jobs that are being cut. While the company appears to be targeting productivity improvements, I’d think total output would be lower than previous expectations. That said, the info in the media isn’t particularly clear on what’s occurring. Thanks for your comment. Good point about China’s coal quality requirements.

  3. NSSfT says:

    Jim, I think you are spot on about the changes in Chinas’s demand profile. But really its hard to be optimistic about coal. Most of us know its peeked and that the stranded asset argument will impact Qld in a big way. It won’t stop coal being mined, but the growth has all but gone. If we are relying on the Adarni project to keep the state afloat we will all have to move to Victoria!

    Gene my real question is this: What can Queensland do? I know you are a long-term optimist but we have so few export earners except for Coal and soon Gas.

    • Gene Tunny says:

      Thanks for the comment, NSSfT. Most future jobs growth will be in services and there will be huge demands for people in health and aged care, for example. Also, with the mining boom over, the Australian dollar is likely to continue falling, which will be good for tourism. Finally, having a well educated population means we should be able to adjust to and take advantage of changing economic circumstances.

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