Withering cost cuts across the mining industry have left tens of thousands of people without jobs from the Arizona desert to the Andes — and there is a litany of evidence that the situation is growing worse.
International mining companies also have postponed or canceled projects and padlocked the gates to mines as consumers have cut spending on cars, jewelry and housing.
Global mining giant Rio Tinto announced last week that production of iron ore, used to make steel, tumbled 18 percent in the fourth quarter, and it said Tuesday its aluminum subsidiary would double previously announced production cuts.
Unwanted copper, gold, bauxite (used in aluminum) and iron ore are piling up or being left underground as the recession saps demand.
“Expect inventories to get bigger, and expect this continuing process (of cutbacks),” said Andrew Martyn, a portfolio manager who specializes in mining for Toronto-based Davis-Rea. “It’s going to go for quite some time here.”
The effect on many communities worldwide that rely on mining has been immediate. Workers are protesting job cuts, and others are expected to begin migrating in large numbers in search of work, some across international borders.
“A lot of the communities are remote, so that when (mines) do shut down, the town actually collapses,” Martyn said.
The bulk of the layoffs in the United States are in base metals such as copper and zinc.
Coal companies have slowed production from Wyoming to Australia. Coal jobs are among the highest-paying in many rural U.S. communities, potentially creating a dire economic ripple effect. In the past, coal companies have been more recession-proof, but the average price per ton for Appalachian coal has fallen more than 35 percent since the summer.
Tens of thousands of mining jobs have been lost globally in recent months as manufacturers shut down. U.S. industrial production plunged by double the amount analysts expected in December, capping the worst year for manufacturers since 2001.
“As little as three to six months ago, steel companies were running flat out around the world because China was making factories to ship goods to the rest of the Western world,” Martyn said. “That process has come to a grinding halt.”
