Unions seeking to re-establish themselves as a force in Western Australia’s iron ore industry have told BHP (ASX:BHP) they want guaranteed annual pay rises for workers, as the mining giant wrestles with the influence of new industrial relations reforms amid an economic slowdown in China.
The Australian Workers’ Union, along with the Electrical Trades Union and the Australian Manufacturing Workers’ Union, initiated negotiations for a new agreement — the first in more than a decade — earlier this month. The decision to begin discussions was made under new legislation that does not require the unions to show evidence of worker support.
But BHP chief Mike Henry says the ongoing union action could hamper the company’s multi-billion-dollar Pilbara expansion plan.
“Of course, underlying labour productivity is one of the factors that drives economics of any future investment opportunity,” he explains.
“There’s (sic) two opportunities ahead of us at iron ore, one is to go from where we are currently to 305 million tonnes, and that largely comes through a focus on ongoing productivity improvement with some smaller de-bottlenecking investments.”
BHP’s iron ore output in Western Australia currently stands at roughly 287 million tonnes per year, and the company has carried out studies to further lift production from 305 million to 330 million tonnes per year.
Henry also noted that the real impact of new industrial relations reforms, such as the ‘right to disconnect’ rules that took effect on Monday, remains unclear.
“The cost impact won’t come through immediately, this will be gradual over time when some of these changes are brought into effect,” he says.
The union action in the Pilbara — which came at roughly the same time as a separate strike among BHP workers in Chile — adds to the threat posed by an economic slowdown in China.
The price of iron ore — the key ingredient in steelmaking — hit its lowest point since 2022 this month as a crisis takes hold of China’s domestic steel industry. Accounting for much of the blame is the country’s struggling property market; the millions of homes left unfinished, unsold or vacant, and — until recently — little sign of a rescue effort on the part of President Xi Jinping.
Iron ore rebounded slightly on Tuesday to just over US$100 ($147) per tonne after sliding to US$93 per tonne last week.
But Henry is anticipating a revival of China’s property sector over the coming year thanks to more favourable government policies. Beijing has, for example, scrapped the nationwide minimum mortgage interest rate and reduced the minimum downpayment ratio for first-time buyers, from 20% to 15%.
Earlier this year, China’s central bank said it would allocate 300 billion yuan ($62 billion) to financial institutions to lend to local state-owned companies for purchasing complete but unsold apartments.
Still, Henry, in an interview with CNBC, noted there remains “a bit of volatility” regarding China’s steel demand, but that other steel-using sectors — such as infrastructure, shipping, and automobiles — could pick up some of the slack.
Write to Oliver Gray at Mining.com.au
Images: iStock
