Townsville to bear brunt of Glencore cuts

Posted October 14, 2015

Glencore cuts

Cuts across Glencore’s zinc operations in north-west Queensland are likely to affect Townsville and other service centres more than Mount Isa, according to a North Queensland economist.

Empower Economics principal economist David Lynch said the global mining giant’s move was not a good sign as far as industry confidence went and highlighted Glencore’s “fairly precarious” debt situation.

The supply chain would bear the brunt of the impact as the north-west Queensland zinc operations wound back, he said.

“Mining doesn’t use a great deal of labour in itself, but all of those support industries are absolutely critical,” he said.

“We will see some knock-on effects in transport and logistics, engineering and other professional services.

“From a regional perspective the impact will be much greater than the direct effect in relation to the loss of those 500-odd jobs.

“I dare say, as has been the case previously, that the effects will be far greater outside the North West Minerals Province than within it.”

In addition to lost supply and service work throughout NQ, he said many of the jobs being cut involved fly-in, fly-out contractors rather than Mount Isa-based workers.

“The effects will be felt in places like Townsville - having said that, I think we’re all prepared for this situation and focused on adjusting to the change in circumstances,” he said.

Mr Lynch said unemployment in the Townsville area was sitting around 7.5-8 per cent - much higher than in north-west Queensland, which had seen unemployment rates decline in recent years to about 3.5 per cent.

However, he said the latest figures were from mid-year and it was possible this would change in the next six months.

While labour force figures in the north-west had remained fairly static, Mr Lynch noted that people in that area were facing changes in wages and conditions as mining operations looked to cut costs in line with the shift in commodity prices.

He stressed the major boom, and now bust, in the mining industry had been focused on coal and iron ore.

“The North West Minerals Province’s stock in trade is base metals and some of those prices are at five year lows – but those lows are still fairly high. We’re certainly not seeing the same sort of problems that we are seeing in coal and iron ore,” he said.

“What we are seeing right across the board is these large multinational companies in particular are looking at cost savings.”

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