Regulation News

Long term vision helps to navigate the short term peaks, troughs

It seems that not a day goes by in our media without another prediction of “doom and gloom” in the mining industry. It intrigues me that we seem to have gone from the largest mining boom in Australia’s history to the end of the boom in the space of two issues of the Financial Review.

This negative press, coupled with significant reductions in housing demand and government infrastructure spending in some states, is inevitably generating a lot of unease in the quarrying sector.

An IBISWorld report earlier this year, however, puts a little perspective back into the discussion, predicting that revenue growth in the quarrying sector during 2011-12 will be 8.7 per cent. This will give a year-on-year growth of 1.5 per cent over the past five years, despite losses during the GFC years.

The quarrying industry is continually challenging the relative merits of long term or shorter term investment. The problem is we continually use our most recent past as our reference for investment decisions.

In mining, quarrying is quite unique in that we produce products today that are often used on construction or road building sites the same day or next day. Today’s aggregate production can be used in concrete, cement or asphalt production tomorrow. While some of our product is sent to stockpile, the rigours around management of working capital and market pricing experienced in other metalliferous and coal mining are not so important in our industry.

As a consequence of the short turnaround in our product supply chain, negative trends are felt immediately there is a building or infrastructure slowdown.

My view is that our industry has failed to recognise, and cost in, the impacts of changing markets and demand trends over the longer term.

While we do read trends in construction and government infrastructure spending quite well, our preference is to rely on local and shorter term forecasts on which to base production targets and capital spend. This is our comfort zone and, for those quarries operating in more remote areas, is the only reliable data that quarry operators have.

This same philosophy has been used in staff attraction, retention, training and development. The moment business experiences a downturn, “non-essential” or discretionary expenditure on things such as employee development, safety and environmental compliance and employment benefits are cut, impacting heavily on morale, staff retention and productivity. And given the short turnaround nature of our industry, such negative impacts occur immediately.

The problem is exacerbated when a recovery occurs, because it is not so easy to replace the staff and resources we were so quick to get rid of when the downturn occurred.

I understand the many pressures on business but I feel that a longer term view of market trends, labour requirements and capital spend would put our industry in a stronger position to deal with short term peaks and troughs in our traditional markets. Funding models and strategic thinking may need to change so our reactions to immediate downturns factor in longer term goals for our organisations.

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