First big commodity correction. They will surprise by staying strong even as the world slows. This commodity bull is secular and long term, but the next 12 months will be problematic......
For now, things are crook.
"THE nation's mining industry has had one of its darkest weeks in years as the global economic crisis bit harder.
More than 1000 workers were axed, or put on notice, and more than $US2 billion ($3 billion) of expansion shelved or slowed.
Plummeting mineral demand has combined with the drying up of credit to force previously high-flying miners like Rio Tinto, OZ Minerals and Xstrata to take the knife to growth, production and workers.
Since July, more than 5000 mining jobs, or 3.5 per cent of the nation's 140,000-strong mining workforce have been axed, with more job cuts to come in the next month.
Miners, who as recently as November were struggling to find workers in some sectors amid a boom-induced skills shortage, have been shocked at the speed with which the global credit crisis has hit the industry.
Rio is expected to have by far the biggest impact on the nation's mining workforce and growth programs, as the $US39 billion of debt it racked up in the 2007 purchase of Canada's Alcan cripples its growth plans and puts 14,000 workers out of a job worldwide.
Indicating how toxic the debt on a balance sheet has become, BHP Billiton -- which has little debt and similar operations to Rio -- has so far flagged minimal cuts to local operations and few overseas.
But it is not immune to the global economic slowdown and its overall production and financial figures are being affected.
BHP compounded Rio's problems in November when it walked away from its $140 billion hostile bid and sent the former target's share price plummeting.
So far, Rio has announced 600 workers and contractors will be out of a job at its Kestrel coal mine in Queensland, Northparkes copper mine in NSW and Argyle diamond mine in Western Australia.
If Rio's cuts are proportional to the total workforce it has here, however, the total could climb to 3000.
Rio chief executive Tom Albanese said conditions in the new year had shown few signs of sustained improvement and the miner was bracing for a long period of volatility.
"I think we'll see some improvements in some months and we should accept some setbacks in others," Mr Albanese said.
Rio is cancelling the vast majority of its growth projects by cutting back its 2009 capital spending budget by $US5 billion to $US4 billion.
