Coal industry must improve productivity: Kenyon-Slaney

THE Australian coal industry is beset by structural and cyclical challenges, says Rio Tinto’s energy chief executive Harry Kenyon-Slaney, who has issued a blunt warning to the NSW government to get its planning approvals in order after an extension to the Warkworth project was rejected.
Coal industry must improve productivity: Kenyon-Slaney Coal industry must improve productivity: Kenyon-Slaney Coal industry must improve productivity: Kenyon-Slaney Coal industry must improve productivity: Kenyon-Slaney Coal industry must improve productivity: Kenyon-Slaney

Rio Tinto’s energy chief executive, Harry Kenyon-Slaney

Lou Caruana

The industry will now have to improve productivity to overcome the problems and place it on a more sustainable footing, while government planning and approvals must be streamlined to meet these challenges, he said.

“It is clear that the sector is facing a number of very strong headwinds – some exogenous, some self-inflicted,” he said.

“The list includes sharply increasing costs, weaker markets, declining productivity, prices falling from historic highs and a strong local currency – which has been making Australia’s export industries less competitive in global markets.

“As an industry we need to knuckle down and do things very differently if the sector is again going to be an engine of the nation’s economy.”

Continuing changes in the regulatory environment have dramatically diminished the industry’s confidence to invest, Kenyon-Slaney said.

“A current example in my business is a New South Wales court decision this year which overturned consent for an extension at one of our Hunter Valley mines,” he said.

“It is a 30-year-old mine. The consent was approved by state and federal governments during a rigorous three-and-a-half year public process. This court decision has now created uncertainty for every major new investment project planned in that state, as well as for existing mines simply requiring approval to continue operating.

“Uncertainty is a threat to the broader economic development of NSW and I’m calling on NSW Planning Minister Brad Hazzard to restore clarity and certainty to the planning system in his state.”

A serious structural issue facing the industry is the need to dig deeper to access coal seams, Kenyon-Slaney said.

“After over a century of operations in some coalfields, mines in Australia are going deeper, and the result of this is that the amount of waste removed from over the coal is rising – which requires more effort to extract similar or lesser volumes,” he said.

“Today, there is intense pressure to improve Australia’s global competitiveness – and lifting productivity is key.

“There is no silver bullet. It will require industry and government to work closely together to strip away inefficiencies and create a constructive working relationship.

“For example, businesses will need to talk to suppliers to get input costs down.

“They will need to be candid about eliminating waste, to test whether they can survive on using fewer people, materials and supplies to drive up efficiencies.”

Rio Tinto Energy froze its workforce salaries this year to try and claw back some of the above-inflation increases paid over the past decade, in a tight labour market.

“I am proud of the way in which our several thousand employees took a deep breath and accepted this as an appropriate measure, given the state of the business,” Kenyon-Slaney said.

Since 2008, wage rates in the Australian mining industry increased by 25%, outstripping inflation by, on average, 10%.

“The result is a near perfect storm which is currently crashing against declining prices and a stubbornly strong dollar,” Kenyon Slaney said.