The first significant effects of BHP Billiton’s decision to postpone more than $20 billion worth of expansion projects at Pilbara are being felt, with the Western Australian saying the ‘ripple…has become a wave’ after one of the main engineering contractors for the firm in WA made moves to cut around 500 jobs.
Draftsmen and contract engineers from the FAST joint venture between Sinclair Knight Merz and US-based Fluor are said to be the primary targets of cuts as the team looks to shed more than a third of its 1,400-strong workforce.
The joint venture has been responsible for most of BHP’s engineering, procurement and construction management work in Pilbara but is clearly being affected by BHP stripping back its plans, including the massive Port Hedland outer harbour project.
Other engineering contractors rumoured to be affected include Calibre Group and Worley Parsons.
Meanwhile, 600 job losses were reported at Fortescue Metals Group, which is faced with rising financial problems caused by the sharp drop in iron ore prices.
Rio Tinto, the other main employer in the region, however, has moved to quell any fears about its operations with Greg Lilleyman, head of their Pilbara iron ore operations, saying that the company was pressing ahead with ambitious spending plans.
Speaking at the Association of Mining and Exploration Companies conference, Lilleyman said the company is “…currently midway through installing a further 60 per cent increase to our capacity to take our business to an annual throughput of 353 million tonnes a year.”
Lilleyman said the company expects to reach that target in 2015 should all go according to plan. He added that the struggles many companies are facing in the area could even serve as a positive for existing low-cost producers such as Rio, allowing them to further entrench their positions.
“This can only be positive for the medium-term supply and demand balance, and therefore prices and returns on Rio Tinto’s industry-leading projects,” he said.
With the recent news of Olympic Dam’s expansion in South Australia also being shelved by BHP, the industry hopes the apparent developing wave doesn’t become any more widespread and escalate into tidal proportions.