BHP bid to keep iron hand on costs
The Australian Financial Review reported that BHP Billiton’s new iron ore chief, Mr Jimmy Wilson, has targeted more job cuts and a boost in labor productivity to revitalize its iron ore business now that boom time scarcity pricing has passed.
In his first interview since taking over as iron ore president in July, Mr Wilson said that BHP needed to focus on driving costs lower following the downturn in the iron ore price.
Ahead of a presentation at an Australian Securities Exchange resource conference supported by The Australian Financial Review, Mr Wilson said that the goal was for BHP to increase its volumes without boosting its headcount at the same rate, even though iron ore has rebounded to USD 121 a tonne. BHP cut about 200 iron ore jobs after the sharp plunge in the price of the steel feedstock to less than USD 90 a tonne in August and September.
Mr Wilson said that “We always look at ratios between folk that operate things or maintain things that get operated those are the folk that actually drive the value in the business, our business. The rest of us work for them. So what you don’t want is too many folk that are not part of that direct value addition in the business. So we are focusing on managing that number down.”
The South African executive said that his division was focused on 3 goals: boosting labor productivity, lifting volumes and improving procurement. Mr Wilson, who was appointed in March, had previously run businesses with lower margins, such as energy coal, nickel, chrome and aluminum.
He said that “I have reasonably well-honed skills in ensuring that the business does deliver at the lowest cost. Certainly the guidance is probably a bit more of an increased focus in that area, principally for two reasons. One, the markets have turned down and two, I do bring those skills.”
BHP plans to invest more than USD 9 billion in the Pilbara over the next 2 years to complete expansion projects, but Mr Wilson said that he wanted to do so without more administrative staff. The company has also cut contractors that were working on the USD 20 billion outer harbor project at Port Hedland, which has been shelved indefinitely.
He added that “We still are building furiously let’s be very clear. We are deploying more capital in the next two years than we have in the past. But in terms of where the focus of the organization is, it is also now looking at capacity utilization and focused on that area.”
Mr Wilson said that “The first objective is more tonnes through the same kit capacity utilization,” adding that the high fixed costs involved with mining. Rival Rio Tinto has had much success in this area since launching a remote operating centre in Perth for its iron ore division.
He further added that “It is almost like a trading floor where information flows a lot freer and easier because people just simply are bumping into each other at the coffee machines and that sort of thing,. So I think that we’ll be able to leverage that. Will that result in improved volumes through the system? I’m absolutely convinced it will.”
Source - The Australian Financial Review