Random Analytica

In January I raised the prospect that mining had returned to Business-As-Usual (BAU), although its return heralded a much more ‘leaner and meaner’ approach. With the second month of data for 2013 completed, the trend around employment which commenced in November has continued, confirming that we had commenced a new normal. What is more interesting is that current producers are emphasising cost cutting, while future projects or producers are trying to complete works as fast as possible. Thus the slight negativity we are seeing in employment sentiment is not reflected in the employment gains, even when like this month the employment losses recorded neared 2000.

An obvious example of this was the Rio announcement of the $3.1-billion dollar Pilbara expansion program that will employ 1,500 this year in the infrastructure phase and another 700 ongoing positions when it moves into its operations phase. 2,200 new positions sounded great but it’s a shadow of its 2012 program which had started to recruit for 6,000 expected roles but was quietly axed without explanation. In the same month Rio announced 350 positions would be going at the Argyle diamond mine, mainly from its contracting staff. There are no mixed messages here, Rio is repositioning out of Africa expanding only where it can be assured of good margins, while any of its assets that are marginal (I’ve been aware of Argyle being marginal for about a decade) are being cut or cutback.

While the producers continue to increase production while driving down costs, those that are not producing or have assets that are not in play are looking to get them completed ASAP. In this case though, it’s the lack of stories that I find interesting.

So, in terms of employment I’ll be interested in following updates (or lack thereof) from small to medium operators who are not producing at the moment, anything in Queensland that is not producing and as an aside, the highly leveraged FMG assets which are still in an expansion phase. Given all the cuts to mining staff across Australia I will also be following stories about mining contractors, given the amount of movement in the market currently. Contractors squeezed profits due to a retraction from these services has me guessing that we might see some go to the wall over the next quarter or two. Like a game of musical chairs, those who don’t have a chair when the music stops will be out of business permanently!

The last item of note for February was the publishing of the FIFO ‘Cancer of the bush or salvation for our cities’ Report by the Standing Committee on Regional Australia, chaired by the Independent Member for New England, Tony Windsor. As the name suggests, the Committee were not big fans, making 21 recommendations to government and 14 to industry to improve the practice. Although I cannot say that this report is as even handed as it should have been (there are both issues and opportunities presented by FIFO/DIDO practice) it does reflect some negativity in the reporting that I’ve been able to capture over the past 14-months of data (see Figure 3).

Now, let’s look at the data. The three dominant mining Workforce Planning stories for January were Employment (22.9%) closely followed by WH&S (19.3%) and IR (14.5%).

Figure 1: Australian Mining Workforce Planning Scan (Jan – Feb 2013). Source: Australian Mining. Some stories have been verified against primary resources.

Diversity and Engagement both received a (+2) positive reading while IR received a (-6), WH&S (-5) followed by Employment and FIFO/DIDO both received a (-4) negative sentiment.

Figure 2: Australian Mining Workforce Planning Positive/Negative Index (Jan – Feb 2013). Source: Australia Mining.

The Employ category which tracks employment gains, losses and general sentiment was the leading Workforce Planning indicator for February but only just at 19-stories (22.9% +1.6%mom/+4.5%yoy). There was a 4210-jobs gain but a spike in jobs lost which sat at 1,994 which goes some way to explain a slightly higher negative sentiment (-4 or -1mom). As previously mentioned, Rio’s revised announcement of 2,200 new positions was the best employment gain for the month but a newly approved Venture Minerals proposal in an opened Tarkine could provide up to 1,000 positions in the depressed Tasmanian economy. UGL announced 1,000 positions will go globally with 700 to be cut from its Australian operations alone, while Bradken, a mining and rail manufacturer posted a $46.7-million half-yearly profit (up from $43-million the previous year) after cutting its staff by 500.

WH&S which tracks Work, Health and Safety incidents and initiatives came in as the second leading indicator for February with 16-stories (19.3%, -19%mom/-8.3%yoy). Only one Australian was reported injured when after a Mount Isa underground incident required an aero evacuation. Near misses and complaints of conditions ensured WH&S finished the month with a (-5) negative sentiment. One story that is worth reading and highlights the dangers of the sector is of the 4^th mining related death in just a fortnight in West Virginia. (For the record, injuries or deaths that occur outside of Australia do not count toward the positive/negative index).

IR or Industrial Relations was the third leading indicator for February at 12-stories (14.5%, +8.1%mom/steady from 2012). Ongoing industrial disputes with Pacific National Coal, lockouts at BHP and a walkout at Hanson Quarry gave IR a (-6), the most negative index reading for February.

Diversity which looks at female, indigenous and disabled participation (although other subject groups would not be ruled out) finished the month with 2-stories (2.4%, -1.9%mom/+0.2%yoy). Both stories looked at the sectors female participation this month. The need for mining to increase its female participation from the current 15% to the 25% by 2020 is my pick for the month.

FIFO/DIDO (or Fly-In Fly-Out/Drive-In Drive-Out) is a mining specific engagement indicator. As previously mentioned FIFO/DIDO with just five stories for February had a negative reading of (-4). Looking at 14-months of data, this negative sentiment has only been reached once before, in June 2012 when the sector was still (for all intents and purposes) booming and the FIFO enquiry was in full swing. Generally the indicator has been negative, averaging 1.5 over the past 14-months although the stories softened from September through to November, which corresponds to last year’s commodity crisis.

Figure 3: Australian Mining Workforce Planning FIFO/DIDO Positive/Negative Index (Jan 2012 – Feb 2013). Source: Australia Mining.

Here is a closer look at the February data.

Table 1: Data for Australian Mining Workforce Planning Scan (Feb 2013). Source: Australian Mining.

Finally, here is a look at the Mining Employment Gains/Losses tracker for 2013.

Table 2: Mining employment gains and losses for 2013. Source: Australian Mining.

Update 1 (5/03/2013): The Commonwealth Bank released an economics update on the 25^th February which I only had a chance to read today (many thanks to Andrew Duffy (@ajduffs) for passing it on). Its findings, especially in relation to cancelled projects for 2012 and CAPEX decisions for 2013 are most interesting.

Update 2 (6/03/2013): New infographic. Rather than more information via a table or a graph I thought I might show the breakdown of Australian stories via a map of Australia. I’ll include this as a standard graph from March onwards.

Figure 4: Australian Mining Workforce Planning Australian stories by State (Feb 2013). National stories represented by the AUS figure. Source: Australia Mining and ABS. Software utilised: Stat Planet (non-commercial).

On the 1^st of February I released the first of this year’s Mining Workforce Planning Scans. Since that release I have come across two additional pieces of intelligence which have altered my viewpoint of where mining is currently. First let me detail the additional data.

The first is a mea culpa. At the time of release I was capturing data via a daily email update from Australian Mining which I believed contained all the daily stories. This turned out to be an assumption (of the make an ass out of me, not you kind). In fact by correcting my methodology (using the News archive facility) I was able to add 9-stories, or 4.8% more data to the January statistics.

The second and more interesting piece of intelligence was that over the weekend I was able to complete a data validation of the 2012 Australian Mining data (all 1963 stories) and then converted that to the new format to allow for additional analysis. More on that after a look at the updated January data.

Here is the updated January Workforce Planning Scan with a slightly reduced WH&S count (no additional stories) and a slightly higher Employment count (one addition). Augment and Diversity also increased slightly with an additional story each.

Figure 1: Australian Mining Workforce Planning Scan (Jan 2013). Data sourced from Australian Mining & News Archive. Some stories have been verified against primary resources.

The updated January Positive/Negative Index has only two changes. Augment and Diversity both increase by +1 to the value of 1 with a positive story each.

Figure 2: Australian Mining Workforce Planning Positive/Negative Index (Jan 2013). Data sourced from Australian Mining & News Archive.

Updated January data with an additional nine stories as previously mentioned.

Table 1: Data for Australian Mining Workforce Planning Scan (Jan 2013). Data sourced from Australian Mining & News Archive.

When I initially looked at the finalised January data I came to the following conclusion:

To wrap up, I feel there is uncertainty in the story thus far. First of all, I am not sure at this stage we have enough data to state whether or not mining is starting to normalise or if the sector is still in its ‘wait and see’ mode. I suspect that it’s still in a ‘wait and see’ phase, especially with a federal election called for the 14^th September 2013. Secondly, I know that the mining industry is no fan of the current Labor government and would be hoping for a conservative win but not sure how that will impact on the workforce planning issues and the data.

I guess we will all have to all ‘wait and see’…

Based on the additional nine stories I wouldn’t have changed my view. However, after completing the 2012 analysis in more detail I have now found a compelling trend commencing in September which shows that the mining industry has returned to a business as usual range and has been in that mode from approximately November.

First of all, let’s look at the incidence of stories since Jan 2012.

Figure 3: Australian Mining Workforce Planning Scan (Jan 2012 – Jan 2013). Data sourced from Australian Mining & News Archive. Some stories have been verified against primary resources.

Then a look at the Positive/Negative Index during the same period.

Figure 4: Australian Mining Workforce Planning Positive/Negative Index (Jan 2012 – Jan 2013). Data sourced from Australian Mining & News Archive.

A lot has been made of the commodity crash that occurred in mid-2012 and its impacts on the mining sector (with my view remaining the same, in that most commodities remain overpriced and that oversupply will be the medium to longer term issue). Looking at the graphs over a 13-month period you can easily see that prior to the commodity crash Employment averaged a steady 14.7% and a very healthy 3.8 on the positive side. When commodity prices crashed from June/July the mining sector reacted in two ways. Some operators panicked, reacting by cutting costs and staff quickly, a fact highlighted by the negative 20 number for Employment in September. Other organisations have used the crisis over the past seven months to ‘clean house’, fixing up issues with both their book and labour. This is reflected in the Employment numbers continuing on a slightly negative trend, averaging minus 2.67 over the last three months from lows in September and October while the actual employment losses are still relatively minor (see the Employment Tracker in the previous January release).

I’ll no doubt have more to say about this in the February release as more data comes in but I can say with some confidence that the leaner (and meaner) mining industry has returned to business as usual and the ‘wait and see’ is on hold.

The commencement of this year’s analysis of mining workforce planning brings forward two very distinct but different themes. With only 1 out of every 4 stories covered for the month related to workforce planning my initial thoughts were that the story is a continuation of the Q4 story, which was of an industry that had made the necessary cutbacks both in terms of costs and suppressing IR dissent but wasn’t quite sure where to go from here. The volatility of commodity prices, especially those of iron and thermal coal add weight to this direction, given that business will always take stability in prices over price instability (even when pricing is lower).

That’s one take on the first month of data. For the last five months of 2012 the mining coverage was dominated by employment contraction reports but prior to that it was Work Health and Safety (WH&S) which had the most reporting for six out of seven months as IR peaked at 24.4% in May on the back of the BMA dispute which even led the company to declare a force majeure. So, the question has to be asked, are we seeing a return to more normalised conditions?

Figure 1: Australian Mining Workforce Planning Scan 2012 (Jan 2013). Data sourced from Australian Mining & News Archive. Some stories have been verified against primary resources.

Figure 2: Australian Mining Workforce Planning Positive/Negative Index 2012 (Jan 2013). Data sourced from Australian Mining & News Archive.

The three dominant mining Workforce Planning stories for January were WH&S (38.6%), Employ (20.5%) and FIFO/DIDO (at just 9.1%). The only category to record a positive reading was Recruit/Retain (+2), while WH&S (-6) was in the negative followed by Employ (-3) and IR (-3).

WH&S which focuses on everything safety, both good and bad is often the leading workforce planning category because mining is a hot, dirty and dangerous business. January did not commence on a good note given there were a number of serious incidents including the first reported fatality of 2013 when a Santos sub-contractor died of possible heat-stroke outside of Roma. Several other fatalities were noted in China and Indonesia and these increased the overall WH&S tally but did not add to the Pos/Neg Index as international coverage is recorded as a neutral indicator.

The Employ category which tracks employment gains, losses and general sentiment which dominated the coverage between August and December of 2012 was reduced to 20.5%. With a further 164 jobs lost in the sector and 6210 gained in 2013. You would imagine that the first indications are positive, however the $1.8Bn AUD McMahon contract win to run the Fortescue Metals Group (FMG) Christmas Creek expansion included 6000 hires. As was shown last year, when the iron ore prices tumbled mid-year FMG came under intense financial and speculative pressure. With the potential for the $AUD to rise this year and FMG’s inability to dig up its product for less than approximately $110pmt I would be concerned that, if we see further volatility in the steel index then, the employment gains might not be curtailed by global economic conditions. Overall employment sentiment was slightly negative (-3) but this was more about some ongoing cost cutting and job shedding (just 164 jobs lost) without any large pickup in new hires (210 if you exclude the McMahon contract).

FIFO/DIDO (or Fly-In Fly-Out/Drive-In Drive-Out) is a workforce planning subject unique to only a few industries and has become the dominant method of bringing in large construction and mining workforces into Australia’s remote regional areas, especially over the last decade. In many respects when I look at the FIFO/DIDO figures I also double-check against Work/Life which covers all aspects of Work Life Balance and Work Life Fit issues. At just four stories (one negative, one positive and two neutral) it wasn’t dominate but it is still on the radar for 2013. Of note was a story from my home state of Queensland which discussed tougher guidelines for FIFO with the intent of increasing development of regional areas, thus probably opening a discussion and less emphasis on pure FIFO operations over regional improvements.

Recruit/Retain which follows all aspects of recruitment and retention was the only category to record a positive number for January. As recruitment agencies put out their expected mining employment/skills wish-lists for 2013, the Mining Oil & Gas Jobs infographic (which was a little basic to be honest) generated a very large discussion (for further info see the Mining Oil & Gas Jobs website. I would also suggest that mining recruitment agencies, especially the small ones might come under some pressure this year as the sector insourced its recruitment during the latter part of 2012 as a continual cost cutting exercise while at the same time Foreign Direct Investment (FDI) comes off the boil.

Lastly, IR had just three stories, all of which were separate New Year industrial actions thus it equalled employment with a negative 3. This included a story at the Hay Point Terminal where 300 construction workers employed by McConnell Dowell and GEOSEA, have been waiting for up to four weeks to be paid! Fair enough too.

Here is a closer look at the January data.

Table 1: Data for Australian Mining Workforce Planning Scan 2012 (Jan 2013). Data sourced from Australian Mining & News Archive.

Finally, here is a look at the Mining Employment Gains/Losses tracker for 2013.

Table 2: Mining employment losses and gains 2013. Data sourced from Manufacturing Monthly Newsletter & News Archive.

To wrap up, I feel there is uncertainty in the story thus far. First of all, I am not sure at this stage we have enough data to state whether or not mining is starting to normalise or if the sector is still in its ‘wait and see’ mode. I suspect that it’s still in a ‘wait and see’ phase, especially with a federal election called for the 14^th September 2013. Secondly, I know that the mining industry is no fan of the current Labor government and would be hoping for a conservative win but not sure how that will impact on the workforce planning issues and the data.

I guess we will all have to all ‘wait and see’…

Update 1 (1/02/2013): Magda Knight (Enhance Media SEO) requested an inclusion of a link to the Mining Oil and Gas Jobs site via email. Given that I had made especial mention of their January infographic (and it’s a most reasonable request) I’ve included that link above and in a previous paragraph.

Here is the last Australian Mining Workforce Planning Scan updated to the 14^th December which is the finalisation of Australian Mining until early 2013.

Figure 1: Australian Mining Workforce Planning Environmental Scan 2012 (Jan-Dec). Data sourced from Australian Mining Newsletter & News Archive. Some stories have been verified against primary resources (i.e. ASX, commercial websites and other news agencies).

With only 10-days of data available (the minimum to calculate a decent trend) Employment and Workplace Health & Safety (WH&S) continued to be the dominant stories in December.

This is the sixth straight month where employment stories have been the leading workforce planning issue but there was an improvement in the percentile of positive stories even though the negative trend continued. In the month of November there were 9 unique employment stories, 5 being negative (297 jobs lost) and 3-positive stories (30 jobs gained).

The further breakdown of Employment stories for July through to December (as per the yellow data line):

• July: 25.9% (61.9% negative, 38.1% positive);
• Aug: 35.4% (71.4% negative, 28.6% positive);
• Sep: 44.8% (76.9% negative, 17.9% positive and 5.2% neutral);
• Oct: 35.8% (83.3% negative, 16.7% positive);
• Nov: 32.9% (72% negative, 28 % positive);
• Dec: 31% (55.6% negative, 33.3% positive and 11.1% neutral).

Here is a closer look at the monthly data breakdowns.

Table 1: Data for Australian Mining Workforce Planning Environmental Scan Dec 2012. Data sourced from Australian Mining Newsletter & News Archive. Some stories have been verified against primary resources (i.e. ASX, commercial websites and other news agencies).

Of note were a slight increase in stories relating to Diversity since November after Professor Marcia Langton raised the issue of an Aboriginal Australia middle class. Diversity stories which averaged just 2.1% over the year rock-bottomed between June and September as commodity prices crashed and mining companies looked for savings across their P&L.

A couple more graphs to close out the year. First of all is a look at the data breakdowns for 2012.

Table 2: Data for Australian Mining Workforce Planning Environmental Scan Jan – Dec 2012. Data sourced from Australian Mining Newsletter & News Archive. Some stories have been verified against primary resources (i.e. ASX, commercial websites and other news agencies).

The year of 2012 was really a story of two halves. Before July it was an industry still with great CAPEX projections, continued FDI growth through to 2014/2015, industrial action, skills shortages and wage pressures. From July the mining sector was dominated by collapsing terms of trade, the high Australian dollar, cost savings and redundancies.

To highlight the transition I’ve added a look at the data in two halves. For me the data for Employment and Recruit/Retain (Recruitment and Retention) sums it up. In the first half of the year the annual Employment stories were at just 29.8% while Recruit/Retain was at 70% of their yearly total. During the last half of the year as unemployment stories surged and recruitment/retention stories declined the figures had reversed reflecting the difficult conditions for mining over the past six months.

Out of interest, here is some baseline data I did for the first Quarter of 2009 (Jan – Mar only). As you can see, although the mining industry collapsed in Oct – Nov 2008 you can already see the largely negative employment stories declining (as stimulus packages were deployed across Australia and China) and by March the WH&S stories returning to longer term normalised levels. Although it would have been interesting to baseline for 2008 and 2009 I just didn’t have the time.

Figure 2: Australian Mining Workforce Planning Environmental Scan 2009 (Jan-Mar). Data sourced from Australian Mining Newsletter & News Archive. Some stories have been verified against primary resources (i.e. ASX, commercial websites and other news agencies).

My last pick of the month for December goes to the Australian Mining story wishing everyone a Merry X-Mas and a Happy New Year. Not only do I wish to share that sentiment with all of you but I received an unsolicited special mention in dispatches for my input to the online magazine during 2012. I very much appreciated the thought. In return I’d like to specifically thank two Australian Mining staff for their support in building this Mining Workforce Planning Scan and Db. They are Andrew Duffy who was a great help on industry specific questions as I had a lot to learn about the industry over the past year and Sharon Amos who greatly assisted me mid-year when my email address was dropped unannounced.

Merry X-Mas to all of you working in or around the mining industry and a Happy New Year.

Over the past couple of years I’ve seen multiple presentations about mining employment and its impact on employment. As per a recent article ‘The Myth of Mining Employment’ I actually detailed just what a low employer the mining industry is.

Queensland is currently one of the worst performing economies in terms of state based unemployment so I thought it would be interesting to look at the most recent Census 2011 data and detail where the current mining employment is, the actual real numbers and at what concentrations they are in terms of overall employment and population.

Figure 1: Queensland Mining Employment by Regions as a total. Data sourced from the Australian Bureau of Statistics Census 2011, the Australian Bureau of Statistics and the Queensland Office of Economic and Statistical Research.

Numbers don’t tell the whole story so I’ve also cut the graph to show the percentile employed in mining to the total employed population. As the graphic shows the mining hubs of Mackay, the Queensland Outback, Fitzroy and the Darling Downs all have higher than average mining employment numbers. While the large numbers from Brisbane reflect the concentration of corporate headquarters plus the natural centre for state Fly-In Fly-Out operations.

Figure 2: Queensland Mining Employment by Regions as a percentile of total employed population. Data sourced from the Australian Bureau of Statistics Census 2011, the Australian Bureau of Statistics and the Queensland Office of Economic and Statistical Research.

As I’ve talked about previously, mining is not a big overall employer. When the Census occurred in August 2011 there were 226,900 Australians employed in mining, of which 44,000 resided in Queensland (or 19.4%). As at August of 2012 that number had increased by almost 50,000 to 275,200 so you could extrapolate that on state averages Queensland may have increased its mining employment by 10,000 or so over the past year.

The big employment opportunities for mining are in the infrastructure phases which are now coming off once in generational highs but still have forward momentum at least over the short term. Unfortunately, most of the discussion around mining employment looks to the large infrastructure based numbers currently in play and forgets the evidence that is freely available.

Here is the latest Australian Mining Workforce Planning Environmental Scan updated to the end of Nov 2012.

Figure 1: Australian Mining Workforce Planning Environmental Scan 2012 (Jan-Nov). Data sourced from Australian Mining Newsletter & News Archive. Some stories have been verified against primary resources (i.e. ASX, commercial websites and other news agencies).

Like the previous month, the most prominent Workforce Planning story and issue for November was employment. If you look at the data I present in Figure 1 you might consider this was a fait-accompli but the first story on employment (which was positive) didn’t come about until the 7^th November and by mid-month only six stories were on the book. Most of the employment stories (19/25), which have been mainly negative, actually came about in the second half of the month.

This is the fifth straight month where employment stories have dominated. In the month of November there were 25 unique employment stories, with 18 being negative (with 1,071 confirmed jobs losses) and 7-positive stories (1,237 confirmed jobs gained).

The further breakdown of Employment stories for July through to November (as per the yellow data line):

• July: 25.9% (61.9% negative, 38.1% positive);
• Aug: 35.4% (71.4% negative, 28.6% positive);
• Sep: 44.8% (76.9% negative, 17.9% positive and 5.2% neutral);
• Oct: 35.8% (83.3% negative, 16.7% positive);
• Nov: 32.9% (72% negative, 28 % positive).

The updated data really does show an industry trying to do any last tidying up prior to the Christmas break. 35-jobs gone at Grasstree, QLD and the 13-jobs lost at Bengalla, NSW are good examples of mid-tier and large companies cutting labour costs. What should be added is that I have not seen a lot of stories in relation to the contracting companies and their labour issues. No doubt they wouldn’t like this information in the public sphere.

A better idea of what the Australian mining industry employment story has been like at a macro level will become apparent when the ABS updates its Labour Force, Detailed data to include changes which occurred in the Sep – Nov period.

Table 1: Data for Australian Mining Workforce Planning Environmental Scan Nov 2012. Data sourced from Australian Mining Newsletter & News Archive. Some stories have been verified against primary resources (i.e. ASX, commercial websites and other news agencies).

Work Health & Safety (WH&S) returns to around its long-term average (currently 22.7%) with 17-stories which reflected 13-injuries and two deaths. The Cessnock man who died just kilometres from his home drifted off the road where he crashed into a parked car. One of the items that have become apparent in my research this year has been the large amount of deaths of miners driving to or from work, which also has to call into question the fatigue management plans of miners and their contracting companies plus the state of our roads which connects our mines to our modern day miners.

Industrial Relations (IR) had the third highest tally this month but at eight stories (10.5%) has almost decreased by a third from its half-year average of 15.5%. This has to be due to the post EOFY year crash in commodity prices. One thing to watch, especially in 2013 will be the increased uptake in union membership amongst mining communities, who for the first time are under employment security pressures.

My pick of the month for November goes to The WestBusiness story about the recent cuts in the Mining sector impacting on the gender gains in recent years. The data from my own research also shows the retraction on softer Workforce Planning issues with Work Life Fit (Balance) averaging just 0.7% since July, Skills Shortages 1.1% and Diversity (incl. of all diversity issues) the highest on a low 1.4%.