The resources and energy industry in Australia has been responsible for a substantial level of wealth creation and transfer for well over the past decade. According to the Australian Bureau of Statistics, the mining industry is the highest paying industry on average, with full-time workers receiving an average $2,656.30 per week (excluding overtime and bonuses); that’s over $138,000 per year. With the current two-speed economy, the Resources and Energy continues to prop up the country, yet the Retail and Technology Sectors are 15% down, being hit the hardest due to inflationary forces.
276,900 people are directly employed in mining, oil and gas operations across Australia. There are more resource employees located in Western Australia and Queensland than any other state, with 131,800 and 74,500 respectively (as at February 2022). Australia’s resources and energy industry will require around 24,000 new on-site operational employees by 2026, according to AREEA’s Resources and Energy Workforce Forecast 2021–2026. It also draws attention to the 98 projects worth $83.8bn, either ‘committed’ or considered ‘likely’ by the Australian Government’s Department of Industry.
This forecast occupational breakdown includes:
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- 9,233 mining plant operators;
- 4,842 supervisors, management, administration and other white-collar roles; and
- 4,639 engineers, geologists and related roles.
All eyes are on the Bowen Basin as the bidders for BHP’s multibillion-dollar sale of its Queensland coal mines Blackwater and Daunia jostle for positioning. It was reported last week that Yancoal was reluctant to continue and so the remaining companies, Whitehaven Coal, BUMA Australia, Peabody and Stanmore Resources all have bulging amounts of cash at the bank given the recent inflated coal prices + global demand.
Metallurgical coal prices remain volatile but are holding well above their pre-2019 level. The Australian premium hard coking coal price is estimated to average US$273 a tonne in 2023 but is forecast to fall to around US$200 a tonne by 2025 as supply conditions improve. Australia’s exports are forecast to lift from an estimated 157 Mt in 2022–23 to 175 Mt in 2024–25, as several new mines open. As prices decline, the value of Australia’s metallurgical coal exports is forecast to fall from an estimated $60bn in 2022–23 to $42bn in 2024–25.
It is worth noting the Chinese domestic policy remains a significant variable. In the past, Chinese steel production has been subject to policy interventions. Steel production in China has already flattened off in recent months, and further weakness would likely reduce price pressures significantly given China’s dominant share of global steel production.
A number of our Resources and Energy market discussion items are:
The Government and RBA have repeatedly recommended an increase in Productivity as a remedy to inflation, requiring working Australians to put their shoulder to the wheel to push our way through to a soft landing – working from home has been strongly criticised but most organisations understand it is here to stay in some shape or form; three days in the office being the most popular.
One lever that enabled Company’s and Executive’s stability throughout the pandemic was the Retention focus on loading up LTI’s. It is now two and three years on and as a consequence, we arrive at a large number of executives coming off their LTI agreements which are now being labelled “like falling off the LTI cliff”. It is fair to say that executives no longer consider the LTI as the influencer it once was and so the reluctance to accept LTIs as opposed to Salaries and STIs.
International candidates and expatriates from the developed Countries are currently struggling to see any value in relocating to Australia given our dollar being so weak at 64 cents.
Australian Resources and Energy Employer Association (AREEA), AREEA’s firm position is that if the ‘Same Job, Same Pay’ policy proposal will see operations close, jobs lost, regional communities adversely impacted, and state and federal tax and royalty revenues forgone.
The two key drivers of change remain Technology and ESG, both having infiltrated the DNA of most organisations at all levels and functions. Technology changes look like increased automation and data driven decision making with ESG changes look like energy transition fundamentals like reducing carbon emissions, electrifying operations and enabling renewables in alignment with the Paris Agreement milestones.
Notable executive movements within our sector over the last six months include:
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- Douglas Thompson has been appointed as Chief Executive Officer at Coronado Resources Inc;
- Sandy Sibenaler has been appointed as Chief Financial Officer at South32 Ltd; and,
- Mark Ruston Mark Ruston has been appointed as Chief Executive Officer at Bowen Coking Coal Ltd.
The executive market remains tight as Boardroom strategy changes post COVID19 has triggered unprecedented C-Suite movements throughout the ASX300, private and multi-national companies.
Blenheim Partners has been delivering many C-Suite roles (CEO, CFO and COO in particular), Strategy and Operational roles in the Coal Sector. If you are thinking through your team’s executive search and succession planning requirements, I would be happy to arrange a briefing.
Bradley Clyde
Partner