14/04/2015 - 08:56

Fortescue rejigs rosters as prices fall

14/04/2015 - 08:56

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Fortescue Metals Group has restructured rosters for mine workers at its operations in the Pilbara, in its latest move to cope with plunging iron ore prices.

Fortescue rejigs rosters as prices fall
Fortescue Metals Group chief executive Nev Power.

Fortescue Metals Group has restructured rosters for mine workers at its operations in the Pilbara, in its latest move to cope with plunging iron ore prices.

Fortescue said operational rosters would change from a cycle of eight days on, six days off to a cycle of two weeks on, one week off.

Chief executive Nev Power said the move would help make Fortescue more resilient in an uncertain and volatile market for Australia's biggest export.

"While we would prefer not to have to change what has been a successful and differentiating roster for Fortescue, we are taking steps in response to the threat of oversupply in the market over the medium term," Mr Power said in a statement.

The new rosters will be in place by June 30.

Fortescue said it would look at opportunities to transfer workers affected by the roster changes.

An iron ore analyst at Patersons Securities estimated the roster rejig would trim about 1 per cent to 1.5 per cent off Fortescue's cost base, given that direct employee costs amount 10 per cent to 12 per cent of its cost of operations.

Fortescue's rostering change is the latest of many steps by miners to cut costs, with contractors also required to cut their rates.

Business News understands that Lend Lease’s contracting arm recently cut labour hire rates for trades working in the Pilbara by 20 per cent across the board.

This was ahead of winning a shutdown contract with BHP Billiton’s iron ore division.

When asked about the cut, a Lend Lease spokesperson said the company recently concluded negotiations for a new enterprise agreement to cover employees working in the resources sector in WA, and that the agreement was consistent with market rates for this work.

The move came as ratings agency Standard & Poor's said it had placed the ratings on eight iron ore producers, including Fortescue, on CreditWatch with negative implications.

It also flagged a cut in BHP Billiton and Rio Tinto's credit rating.

Mr Power blamed Fortescue's competitors, including BHP and Rio Tinto, for causing the global glut of iron ore which has pushed prices below $US50.

He said the oversupply was causing ongoing damage to the industry, all companies in it and to the state and national economies.

"In this environment, bringing our costs down rapidly and sustainably is critical and will place our company in the strongest possible position for the future," Mr Power said.

The Construction Forestry Mining and Energy Union slammed Fortescue for failing to consult mine workers before making the roster changes.

CFMEU WA state secretary Mick Buchan said unions and workers needed to be involved in consultations to ensure the impact of savings measures in workers was minimised.

"We're not putting our head in the sand as far as the iron ore price is going, but the right consultative process with the work force to make savings should be the first port of call rather than just changing rosters," Mr Buchan told Fairfax radio.

Workers are already away from their families for long periods and the new rosters will make that worse, he said.

"They're away from home, they're in harsh climate conditions and they deserve everything," Mr Buchan said.

"When you look at the salary packages of all of the executives, Fortescue, Rio Tinto, Chevron and the like, these executives are paid millions of dollars a year and that's where it should all start from."

Iron ore prices increased on Monday to $US48.80 a tonne, up 3.2 per cent but are still hovering around decade lows.

Fortescue shares were 2.2 per cent higher at $1.82 per share at 9am.

 

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