Random Analytics

Charts, Infographics & Analytics. No Spinning the Data. No Juking the Stats

Month: March, 2013

Random Analytics: Mining Workforce Planning Scan (Mar 2013)

A Return to Growth

It has become apparent after 15-months of analysis and reporting that each month of mining workforce planning data has a theme. This month the theme is ‘A Return to Growth’ as the sector returned to pre-commodity bust norms in relation to employment. Like the most recent ABS data which showed an increase in Australian employment by 71,400 (the largest increase since July 2000) the Mining Workforce Planning Scan for March received its first positive reading after nine consecutive months in neutral or negative territory.

All of this comes at a time when most of the big-ticket minerals return to sustainable levels of pricing. Noting that the high-commodity price  period ended in late May 2012, iron ore has since returned to sustainable levels (>$110 per metric tonne) from October of last year while thermal coal has nudged past the $100 average in the past month. Less bullish is bullion as it continues its malaise with gold and silver trending down after highs experienced six-months ago.

To emphasise the return to growth the first graph is a positive/negative index looking only at the Employment data. I’ve included a three-point polynomial trend-line which tracks the high price commodity period (pre June 2012), commodity crash period (May 2012 – Feb 2013) and eventual return to growth this month.

6 - Mining_PosNegIndex_Jan2012~Mar2013_EmployOnly

More good news than bad from Employment gave it the highest content count for the second consecutive month while at least three Australian mining work-related deaths put Work Health and Safety (25%) a close second. In another positive sign for mining employment Diversity (9.7%) had several good stories this month which propelled it to third place. Generally, softer workforce planning indicators strengthen as the employment situation improves.

1 - Mining_WFPScan_Mar2013

At +5, Learning & Development was the most positive indicator for March with all five stories this month reflecting Australian research and being of a positive nature. Both Diversity and Employment closely followed with +4.

Reporting of ten Australian significant safety incidents, which included three fatalities and three major injuries against only one positive story propelled Work, Health & Safety to a -9 rating for March. Interestingly Alcohol & Other Drugs/Crime, at -4 was the second most negative indicator as miners featured in four stories including housing explosives at home, increasing use of drugs during downtime and a NSW miner who murdered his girlfriend.

2 - Mining_PosNegIndex_Mar2013

Here is a look at the indicator data for March. Probably worth noting that the Workforce Planning content has increased percentile wise month-on-month since January (25.1%, 34.4% and now 38.5%) but still remains on the low side compared to 2012 (averaging 44.8%).

Additionally any thought that the FIFO enquiry findings which saw the FIFO/DIDO indicator crash to a record -4 negative sentiment last month continuing into March were dashed as the topic was hardly raised during the month.

Goes to show you how much notice everyone (outside of Canberra) takes of Senate and Standing Committee reports.

3 - Mining_Data_Mar2013

March saw another set of good employment numbers reported with 2044-jobs added this year and the Shenhua Watermark Coal Project looking likely to construct another Western NSW mine in 2014. There is still cost cutting going on especially as coal continues to trim fat, reflected by the -317 jobs reported lost in March.

Notably Xstrata announced the closure of its Brisbane coal office (although the location is still visible on its web-site as at 29 March). This has to be seen as both a display of its lack of long-term confidence in its coal assets and potentially the pro-mining Queensland government which has been struggling with higher than average unemployment levels since it came to office in March 2012.

4 - Mining_Employment_Mar2013

The mining centric states of Queensland and Western Australia again dominated with 16-stories (22.2%) each. New South Wales had 10-stories (13.9%), then the Northern Territory and South Australia had one apiece 1.4%. On a national level there were 21 Australian stories (29.2%), two for China (coal-disasters), and one each for Indonesia, Namibia and New Zealand.

5 - Mining_WFPStoriesByState_Mar2013

On a humorous note the story of the month was a Recruit/Retain tale from Indonesia when coal miner Pt. Karya Bumi Baratama advertised for a receptionist asking specifically for “good looking” single females under 25 to apply. Having married into an family with an Indonesia background I have some empathy and can envisage the writing style in Indonesia. If we are honest with ourselves I can’t see much difference when companies request ‘well-presented’. Lucu banyaklah (Very funny indeed)!

To sum up, all the indicators now show that the mining sector has returned to its pre-June 2012 growth phase. Employment numbers look good this year and outside of a disaster in China or a collapsed US economy I can only surmise that these numbers will remain static for the rest of the year.

On that, it would be worthwhile keeping an eye on indicators like Industrial Relations, Migrate/Visa and Remuneration in coming months. A pick up in content and how it plays in terms of positive or negative sentiment will potentially highlight another sector increased wages demand cycle, a situation that the industry is continuing to downplay, even as some commodities return to reasonable margins.

Random Analytics: Mining the Economic and Labour Data

When it comes to Economics and Labour, Australia has more in common with countries such as Chile and Russia rather than the US, UK, or the more unfortunate economies of Spain and Greece.

Yet when it comes to political and business dialogue we are constantly swamped with examples of economies that have no resemblance to Australia’s. This is especially noticeable each month as the labour figures are released and anytime a politician or business group discusses the country’s finances.

Examples of this bias can be found in almost every aspect of political dialogue.

Federally, Labor will constantly compare any economic or labour data update against developed world. Most developed countries are service based or declining manufacturing based economies. Of the developed economies only Australia and Iceland have a greater than 40% mineral export exposure (using 2010 data). Although similar to Australia in many respects the next country in that group with high exposure to mineral exports is Canada with just a 11.9% exposure to the minerals sector.

The Liberal opposition will constantly emphasise saving economies such as Norway who consistently run budget surpluses. At the same time they won’t mention Norway’s prosperous welfare state including high levels of state ownership and high public service employment levels. In his most recent speech Tony Abbott was happy to disregard the bulk of the Global Financial Crisis, except where he could talk up the growth and prosperity of Australia which as he stated ‘happened for the last five or six years of the Howard Government’. Just to jog your memory this was the period 2002-2007, the crescendo of the pre-GFC boom times and mineral exports.

Business is not immune. One of Australia’s most prominent mineral exporters, Gina Rinehart recently stated “warned Australia risks becoming another ‘Greece, Spain or Portugal’ unless it cuts government debt and lifts its competitiveness”.

If you want to understand the Australian economy in a global context you are better served by looking at OECD level (or like) countries that are predominately commodity exporters (specifically minerals).

To that end I have listed five core countries plus Australia which I believe are better indicators of the Australian economy. They are Chile, Russia (non OECD), Canada and Sweden. I have also included the limited minerals exporter Norway (it is actually a prominent oil/LNG producer but a good comparison country all the same).

Table 1: Similar countries to Australia (ranked according to ICMM contribution)

01_MineralExporters                       

To begin, let’s look at two Labour indicators.

Labour – Unemployment

While unemployment is constantly compared by Federal Labor against the developed world the Liberal opposition tends to avoid direct comparisons. The reason for the difference is that Australia’s official unemployment has been very strong, even amongst other commodity producers. Here are two different views of the global unemployment rates, the first showing the six core mineral producers over the past decade (Figure 1) and to show how bad it could have gone a comparison of my best three mineral exporters by unemployment rate against Greece and Spain (Figure 2).

Figure 1: Mineral Exporters Unemployment Rates 2003 – 2013 (as a %)

02.1_MineralExporters_Unemployment

Figure 2: Unemployment Rates 2003 – 2013 (as a %). Norway, Australia and Canada against Greece and Spain

02.2_MineralExporters_Unemployment

Labour – Participation Rate

Both sides of the political divide and almost all business sectors talk about increased productivity, yet when we talk about participation rates we don’t discuss similar commodity economies but emphasise disparities with the US, UK, Japan or Germany (outside of academia or relevant government departments of course). If we look at similar economies data we still better than a fast closing Chile but are under-par Canada by 1-2% and around 12-14% under the long-term average of European competitors. Here is a look at how Australia compares against similar mineral exporting economies.

Figure 3: Mineral Exporters Participation Rates 2003 – 2013 (as a %)

03_MineralExporters_ParticipationRates

Now, let’s consider two economic indicators.

Economy – Balance of Payments

For a country that has done so well out of the Global Financial Crisis (in GDP terms at least) you don’t see that reflected in the political discussion or business surveys. Nor do you see it in the Balance of Payments data. Even with a positive once in a generation Terms-of-Trade position Australian has still outspent it’s earnings by a considerable factor. In fact, Australia has not been able to manage a positive Balance-of-Payment number since 1972-1973!

Figure 4: Mineral Exporters Balance of Payments 1991 – 2011 (in current $USD)

04.1_MineralExporters_BoP

Another fact that is often not discussed is that, unlike Norway Australia is a debtor nation (that is, it spends more than it earns). To emphasise this point let’s look at how Australia compares against Norway (a commodity saving economy) and the USA (a debtor nation). Australia, in my view, does not compare favourably with the USA.

Figure 5: Mineral Exporters Balance of Payments 1991 – 2011 (as a % of GDP)

04.2_MineralExporters_BoP

Economy – Debt

A lot of emphasis is made of the government debt positions, especially by the Liberal opposition and business. Yet, in Australia government debt is low in comparison to globally developed nations and even in relation to other commodity exporters. What is not talked about by both sides is the level of private indebtedness. In 2011 the Australia government was approximately 14% in debt (provisional) yet the private sector (mainly via housing and commercial debt) was 181.1%. Here is a look at the mineral exporter’s data plus Spain and Greece. A good word for Greece too, they were the only country represented in this graph with lesser private than government debt.

Figure 6: Mineral Exporters: Public & Private Debt (as a % of GDP)

05_MineralExporters_Debt

Ruslan Kogan, CEO of Kogan, stated on a recent Q&A that ‘97.4% of people make up the own statistics’. In some respects he is right; many people make up facts to suit a purpose. The intent of this article is not to suggest that politicians or high-level business people make up facts. Rather they generally emphasise certain data and disregard other information which does not support their argument.

You will always gain more insight and a better understanding on the Australian economy if you concentrate on parallel economies, such as commodity (specifically mineral exporters) over manufacturing or service based economies.

What I am also suggesting, if you want to understand the Australian economy you are better served by looking a little harder at the arguments and the data presented.

Note: This is a feature article I wrote for the Australian Mining which was published on the 11 March 2013.

Random Analytics: Mining Workforce Planning Scan (Feb 2013)

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%).

1 - Mining_WFPScan_Feb2013

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.

2 - Mining_PosNegIndex_Feb2013

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 4th 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.

5 - Mining_PosNegIndex_FIFO_Jan2012toFeb2013

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.

3 - Mining_Data_Feb2013

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.

4 - Mining_Employment_Feb2013

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 25th 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.

5 - Mining_WFPStoriesByState_Feb2013                      

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).