BHP Billiton SSM job loses – WA and NZ impact

Nickel prices are very low, and so there are some big cuts just announced for BHP Billiton Stainless Steel Materials. As rumored the $2 Bn Ravensthorpe laterite plant is going to go flat, and about 2,100 jobs in total will go across Nickel West and Yabulu. A total of 6,000 will go from the entire BHP Billiton group, so Nickel is being hit hard proportionally.

That’s really sad. I was lucky enough to consult to the Kwinana Nickel Refinery as well as across  Stainless Steel Materials, and this will come hard. Don’t blame the talented people there however, it’s just that the industry is simply producing too much Nickel versus demand, and unless the supply is curtailed it spells doom for everybody.

The Ravensthorpe plant uses laterite based Nickel, which is in a more common yet much harder to process form. The plant creates MHP (mixed nickel cobalt hydroxide product), a high Nickel percentage green goop, and that is shipped in sealed containers to the Yabulu plant in Townsville. It uses a relatively new technology and was still ramping up, yet it seems just cannot make nickel cheaply enough versus the market prices.

The Yabulu plant was expanded as part of the overall Ravensthorpe capital project, with the MHP mixing in with the other sources of Nickel. The Yabulu plant, like any refinery, is a 24/7 operation, and reducing volume probably isn’t going to change the number of jobs much, but it will affect the volume of other inputs. Interestingly the BHP Billiton press release says that they will “complete a future options study” for Yabulu. This means one of three things – ramping it down, keeping it at old, pre-Ravensthorpe levels, or finding an aternative supply of Nickel. My take is that the answer will almost entirely be dictated by what happens to the Nickel price in the meantime, as well, of course,  on how well the team operates the plant.

The Ravensthorpe affected ex-BHP Billiton employees and contractors will be facing a very uncertain market – and there are 800 employees and 1000 contractors across Ravi as well as Yabulu and, crucially, head office in Perth. There are a lot of very talented people inside Nickel West and SSM and my heart goes out to them in these uncertain times.

Meanwhile mining at the the Mount Keith Operation, which is an impressively enormous hole in the ground in Western Australia, is being scaled back. They will slow mining and produce concentrate from existing stockpiles. That saves 100 employee and 200 contractor jobs in a market where truck drivers have been seeing incomes of $120,000 per year. That sort of  income is now completely unsustainable, and we can expect to see a huge follow-on effect in Western Australia.

The Mt Keith sourced ore is concentrated and then smelted in Kalgoorlie and refined at Kwinana, South of Perth. With the amount of concentrate staying the same we can expect that Kalgoorlie Nickel smelter and Kwinana Nickel Refinery will continue to produce at maximum rates, as the more you make the cheaper the unit cost. We can expect those sites to relentlessly continue to reduce unit costs.

The Impact
Overall the people that will go will more likely be the newer migrants to Western Australia. The mining industry has been fueling a serious boom, with housing, coffee and food prices reflecting a reality that simply wasn’t long term. I see this as yet another potential catalyst for a big popping noise to hit the region.

There are tens of thousands of New Zealanders in WA, and many of them are in the sort of occupations that will be the first to go, Where, oh where will they go to next?
Perhaps to those $22 per hour cleaning jobs in tourist towns like Broome, which employers have been struggling to fill. Those jobs won’t have to pay as much of course, as tourism demand will also dip and supply of employees will rise.

The knock on effects are obvious, and the results could be disastrous. It’s really not a good time to own a house in the Perth market – and I am glad I don’t. However as Nickel prices rise then Ravensthorpe will be able to ramp up again and Perth will come backas well. It may take a year, or many years.

About Lance Wiggs

@lancewiggs
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One Response to BHP Billiton SSM job loses – WA and NZ impact

  1. Hi Lance

    What plugin do you use to get the notify me of comments check box ?

    Thanks

    Bryan Spondre

    Like

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