The recent BHP Billiton organisational restructure will drive productivity improvements without significant operational job losses, according to new BHP operations president of Australian minerals Mike Henry, although the company won’t commit to a deadline for its targeted 290 million tonnes per annum iron ore run rate.
The recent BHP Billiton organisational restructure will drive productivity improvements without significant operational job losses, according to new BHP operations president of Australian minerals Mike Henry, although the company won’t commit to a deadline for its targeted 290 million tonnes per annum iron ore run rate.
The company is sticking by its guidance for production of 270mt milion this financial year, although it said it was confident it would reach 290mtpa.
Backroom operations such as human resources would now be globalised, but not centralised, meaning it would be unlikely there would be significant moves out of the Perth office.
Mr Henry said that would give him an increased focus on improving efficiency and taking lessons from different commodities across the business.
He said the company’s iron ore strategy would remain unchanged after the recent executive level reshuffle, with volume, safety and costs key.
The change in structure had been necessary to drive another round of productivity gains, Mr Henry said.
Further changes to senior management were possible, however.
It comes after a drastic lift in the iron ore price over the long weekend, with the price of the steel-making commodity surging above $US60 per tonne for the first time since last year, rising $9.99/t.
That is good news for the state budget, with every $US1 increase in the average price of iron ore for the financial year boosting royalty revenue by $70 million.
But share prices of the major miners came off a bit today, with Fortescue Metals Group the worst hit, down 9.4 per cent.
See also: BN's iron ore price chart
The crystal ball
Newly minted asset president for Western Australian iron ore, Edgar Basto, said he expected the next phase of Chinese economic growth would be less steel intensive and underpinned by consumption.
Speaking at an iron ore forecasting conference in Perth today, he said that although steel production growth would be subdued this year, it would be expected to grow in the long term.
It would peak in the mid-2020s at between 935mt and 985mt, up about 20 per cent from existing production of 800mtpa.
“On the supply side, we have seen large miners ramping up production, in Australia and Brazil, increasing seaborne exports by approximately 40 per cent between 2010 and 2014, Mr Basto said.
“Some of the greenfield projects initiated in the past few years are still in their ramp up phase or under construction which will result in further supply to the seaborne market in the short to medium term.
“Lower-cost seaborne supply has gradually displaced higher-cost supply, initially displacing Chinese private mines production and more recently higher-cost seaborne supply.
“It is evident that the supply side has proven to be price sensitive with prices returning to historical long-term averages.
“This means we expect further price volatility in the short term.
“Incremental lower cost seaborne production will continue to displace higher cost supply and result in a flattening of the cost curve, as we have seen since 2014, with smaller junior seaborne producers remaining under pressure.”