News

The international issue hitting Queensland jobs

GLADSTONE'S biggest employer, the resources sector, is experiencing a downturn that hasn't been seen by chief executive officers in 30 years.

Job losses are on the way.

The Observer revealed last week that NRG power station officials were meeting with employees about future job losses and understands employees at QAL, Yarwun and Boyne Smelters Limited have all been told job losses could be on the horizon.

But Queensland Resources Council chief executive officer Michael Roche said the problem was not Queensland-specific but international.

>> READ MORE Alumina price to drop 18% in 2016

>> READ MORE Gladstone coal exports at record level

>> READ MORE Steady supply of metallurgical coal puts pressure on prices

He said metal producers were hanging on by their fingernails and a further drop in prices could see them fall.

"There will be more job losses. This is not a coal downturn this is an entire resources downturn," he said.

The market has been tough for QAL and Yarwun owner Rio Tinto; it announced on Thursday it made an $866 million loss last year and a 51% drop in full year profit as a result of a market uncertainty.

In December Rio announced QAL and Yarwun were running at a loss because of an oversupply of alumina from China pushing down the price of their product and announced then there would be cuts.

It's not the news Gladstone wants to hear coming off the back of the LNG boom.

China is forecast to produce more alumina in 2016 than in it did 2015 as alumina prices are forecast to decrease by 18%.

While in July 40 jobs were cut from Orica Yarwun to bring down costs, at the end of January Orica chairman Malcolm Broomhead told The Australian he had been through a few downturns and sometimes they go lower for longer but this had certainly gone lower than people would have thought, in terms of prices.

Mr Roche said the three Curtis Island LNG plants were exporting gas at a time when the oil price had collapsed and they were not making huge gains to pay off the tens of billions of dollars they had invested to construct the plants.

Inevitably the tough situations these businesses are in will hit Gladstone; a QRC report from the end of June showing 87% of the region's gross regional product came from the resources sector.

It also showed the local resources sector employed 2313 people full time and brought $2.9 billion into the community while the flow on created 9777 full time jobs and injected a further $860 million in the local economy.

This downturn isn't expected to last forever but Mr Roche wants state and local governments and service providers - rail, water and ports - to help out.

"These businesses are being hit with large increases in local government rates and some councils are really going over the top like the costs with the gas operations up in Gladstone," he said.

But Gladstone Regional Council chief executive officer Stuart Randle wouldn't offer any help with rates.

"Council rates all industry in an appropriate manner," he said.

"We look forward to seeing if state and federal governments also reflect upon their position regarding amounts royalties."

He's referring to Mr Roche's other appeal to both levels of government to stop receiving royalties from the resources sector until the market recovers.

Neither government has agreed to that.

But help from Gladstone Ports Corporation could be on the way as chairman Leo Zussino said he met with the ports' customers in October and was working with them.

"It was clear and apparent they were suffering extreme business conditions and with the support of the board I asked management to look at ways we can assist," Mr Zussino said.

"Those actions are being implemented with discussions with coal companies early this year."

As for water, Gladstone Area Water Board chief executive officer Jim Grayson said if the price of water was dropped the board would start losing money.

"We don't charge people more for water in times of drought or less in times of flood, we are a regulated monolopy," he said.

So it appears the big industries, like those that support Gladstone, will have to ride out the downturn on their own. But if they can keep producing and cut costs , Rio Tinto chief executive Sam Walsh says, they will be there to profit during the recovery.

"Longer term, demand prospects look promising and we expect this will support a recovery from the current cyclical low phase," he said.

Topics:  alumina coal employment gladstone industry lng metals



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