BHP plans overhaul of Australia iron ore business to cut costs

Detailed summary

Virtually all the industry’s largest players have sought to streamline operations and boost productivity since last year as once-stellar margins begin to come under pressure.

BHP Group plans to restructure its Australian iron ore business as part of a wider cost-cutting effort aimed at helping the world’s largest miner cope with rising expenses and softer prices for the vital steelmaking ingredient.

BHP — where Brandon Craig took over as chief executive officer in July — has already cut 300 on-site workers from the division. It expects to reduce numbers further, primarily from its white-collar base, according to people familiar with the matter, who asked not to be named as the plans are not public. Currently, the Western Australia Iron Ore arm includes more than 16 000 employees and contractors.

While details are still being hammered out, the overhaul of the Perth-based division is expected to simplify management and put more of the support functions directly under the mining assets they serve, rather than in separate divisions, the people said. Some technology work, for example, will be moved out of the central structure, they added.

The changes, which build on efforts begun under former CEO Mike Henry, will ultimately extend beyond iron ore as BHP examines costs in other parts of the portfolio, the people said, adding other divisions could also face job cuts.

Virtually all the industry’s largest players have sought to streamline operations and boost productivity since last year as once-stellar margins begin to come under pressure. Rio Tinto Group CEO Simon Trott has also focused on simplifying the company, combining overlapping roles and stripping away layers of management, red tape and bureaucracy to create a slimmed-down operation centred on iron ore and copper.

China’s rapid industrialisation more than two decades ago drove a dramatic acceleration in demand for steelmaking ingredients and transformed miners like BHP, with its vast, low-cost Australian mines, into a global powerhouse. Now that demand is cooling, costs are climbing and Beijing has also tightened its control over procurement.

BHP says it remains the Pilbara’s lowest-cost…

Opening of the article, excerpted from Moneyweb. To read the rest, open the article on the publisher's site.