WA miners short 10,000 workers, border reopening no panacea Michael BennetWA reporter
Apr 14, 2022 – 1.14pm
Western Australia’s mining industry is short more than 10,000 workers despite the state’s hard border being lifted, according to new analysis that shines a light on the lingering side effects of the McGowan government’s cautious management of the pandemic.
Since WA’s borders reopened to quarantine-free travel on March 3, broking analysts and investors have been visiting companies and mine sites to assess the engine room of the nation’s mining boom after being locked out for large periods in the past two years. WA’s mining sector is struggling to fill skilled labour shortages. BHP
Fresh from a recent trip where he visited more than 20 mining companies, Goldman Sachs analyst Paul Young said it highlighted “acute cost inflation”, with labour costs spiking up to 20 per cent in the past year amid higher diesel, chemical and steel prices.
Mr Young said all up, capital expenditure budgets had jumped about 10 per cent, “driven by higher steel, labour and concrete, but also a lack of maintenance and construction workforce”.
“Anecdotal evidence suggests WA seems to be short over 10,000 workers, with the border opening only seeing modest inflows of interstate and international workers thus far,” he said.
Citi analyst Kate McCutcheon on Thursday told clients that recent site visits in WA suggested labour shortages were “impacting everything from production through to lead times for consumables, and construction timelines for new projects”.
“Cost inflation is at both the opex and capex level [and] is real. The opening of borders hasn’t seen the influx of labour from the east coast as hoped,” she said, as the investment bank upped its 2022 lithium price forecast by 11 per cent.
The commentary confirms miners’ fears that it will take time for Premier Mark McGowan’s reopening of the borders to ease skills shortages crunching all industries.
The Labor government has also been slow to ease other COVID-19 restrictions, on Thursday scrapping some remaining “level two” measures such as the 500-person limit for certain venues – but holding on to its mask mandate for all indoor venues, the last state to do so.
According to a survey released by the Chamber of Commerce and Industry WA this month, four out of five businesses considered skilled labour shortages to be a barrier to growth, up 2 percentage points since the December quarter when the border was closed.
Concerns were “most acute” in the resources sector, with more than nine out of 10 citing skills shortages as a barrier.
However, it is also raising concerns about unsustainable wages and project blowouts similar to previous mining booms. Even though many industries across the nation are struggling with similar headaches, they could offset some of the gains WA’s mining sector is generating from the boom in commodity prices flowing to shareholders, and the state and federal governments.
Mr McGowan this week trumpeted the sector’s record $230 billion in sales in 2021 as COVID-19 was kept at bay, claiming WA accounted for more than half of national goods exports and that the state “carried the nation through the pandemic”. But he made little mention of the flow-on skills shortages or inflation, and how they would affect miners’ growth.
Speaking at a mining event late last month, Genesis Minerals chief and former Saracen boss, Raleigh Finlayson, said getting talent into WA was one of the “major impediments” faced by the industry, which made culture and initiatives to attract and retain workers even more important.
Outgoing Chamber of Minerals and Energy of WA chief, Paul Everingham, said the reopening of the border was welcomed but not a “silver bullet” for the “skills squeeze”.
He welcomed the federal government’s budget measures to incentivise hiring more apprentices, and the WA government’s “Driller’s Offsider Job Ready” program announced this week to provide entry-level employment in drilling roles, but said more skilled foreign migrants were also needed.
“While training has a vital role to play in addressing skills needs in the longer run, the $156 billion of projects in the WA resources pipeline also highlights the critical contribution targeted international skills migration can make in the shorter term,” he said.
‘Get on with life’
Bill Beament, the chief of base metals explorer and mining services business Develop, this month told Euroz Hartley’s Finding the Frontpodcast that the state’s lack of skilled labour was a multi-pronged problem, at the same time as demand for “future-facing metals” such as nickel, lithium and rare earths was soaring.
Asked for his view on WA as a destination, he labelled it “difficult” as all sectors struggled with labour shortages, supply chain bottlenecks and the side effects of WA’s COVID-19 policies, including the toll on mental health.
He said even though the state had done an “amazing” job through the pandemic, it was time to “get on with life” like the rest of the developed world.
“The state’s booming, but we need people,” he said in the podcast, released this month.
“We’re setting ourselves up like in 2007-2008 where the bubble pops and all of a sudden, everyone’s gone and bought more expensive houses, they’ve bought boats, cars, everything [because] we’ve got artificial inflation with wages and that, at the moment, that’s unsustainable.
“And I don’t want to see that happen again, and hopefully it doesn’t, but it’s not right at the moment, it’s just too artificial.”
WA on Thursday reported 8144 new COVID-19 cases, lifting “active” cases across the state to 40,539.
Goldman’s Mr Young said greater spread in the state had so far had little impact on mine sites and production.
However, lithium producer Pilbara Minerals on Tuesday said COVID-19 cases had taken a toll on production in the March quarter, and UBS analysts on Thursday warned that virus spread and absenteeism would impede the quarterly output of other miners.
The maths of that article I posted earlier where I first though more funding was to be immediately booked - rather than a political pledge - does seem a bit unsound ( - even to me -), including to the fact the PM says he will create 5,000 resources jobs over ten years when AFR’s Michael Bennet - or more accurately, Goldman Sachs’ Paul Young’ says 10,000 workers are needed here right now.
I think I will vote for Michael Bennet on who knows best.
There are places shutting down everywhere at present and I am glad Jules’ indicated at the last results that his forward predictions had kept ‘some in reserve’.
—Hopefully it’s enough because, as a WA denizen, I think the ‘squeeze’ may now have settled into something worse than many expected
As for good local financial-focused business writers…… other than Michael Bennett.
My favourite at present is Euroz-Hartley’s, Gavin Allen, whose company also featured in The West today [see here].
(FWIW that story seems also relevant to the plethora of people-pinching being presently promulgated in this great, but way too populousess state.)
The reason I like Gavin is because on the first day of this financial year, when all was doom and gloom price-wise around here he wrote a positive article [ref] and, because Euroz has often worked with NRW, and because I believe Euroz is a maJor market maker here at times …. And because I think he and Jules might be mates after all that consultation despite his up and down ‘way of the world’ yo yo market tricks, so he should be able to speak with authority…
Coincidentally he was also recently reported in a recent Stock head article on problems facing the sector across all of Australia; [CAN WE FIX IT? The ASX construction stocks fighting bankruptcy, materials and labour shortages to service massive forecast growth 25/03/22]
Here is his comment; ..“Despite some very public failures, Euroz Hartleys research director and industrials analyst Gavin Allen says there is no reason why in good operating conditions contractors can’t make good money.
“There’s no reason to expect them to go broke either,” he said.
“I think the industry is profitable, but I think the key message is that it could be a lot more profitable once we get back into normal conditions.”..
Because I am biased, you will understand why I think he is talking specifically about NRW ….
(which EurozHartleys holds in at least one of its’ funds - Westoz ..
—in fact it was the second largest investment there as of last month
(20min delay)