More than 400 jobs are at risk after Downer EDI had a Queensland coal mining contract worth $360 million cancelled by BHP Billiton.
More than 400 people are expected to lose their jobs after BHP Billiton tore up a $360 million mining services contract with Downer EDI.
BHP cancelled the contract two years early at the Goonyella Riverside coal mine in central Queensland, amid persistent weak global coal prices.
Downer employs 427 people at the BHP Mitsubishi Alliance (BMA) site for pre-stripping – the removal of unwanted material before mining.
Both Australia’s coal and mining services industries are under siege with thousands of jobs axed in the past two years and miners cutting investment and operating costs that soared during the boom.
The big miners were squeezing the services industries dependent on them to such an extent that mining services senior executives were contacting the union for help, Construction, Forestry, Mining and Energy Union vice-president Chris Brodsky said.
“The contracting companies are ringing out of the blue, saying: what can you do, how do we try and combat what these giant multinational companies are doing to us, forcing us out of business?” he told AAP.
“That’s how bad it is, ordinarily they would steer clear of us.”
Downer EDI would not rule the job losses in or out, with a spokesman saying it was too early to say as the contract was only terminated on Tuesday night.
Mr Brodsky said he doubted many workers would keep their jobs.
“I can’t see Downer having any other work for them … I could be wrong but work is pretty scarce out there at the moment,” he said.
Downer estimated the termination would reduce its work-in-hand by $160 million in the 2014/15 financial year and by $200 million in 2015/16.
Its shares plunged to their lowest level for 2014, down 59 cents, or 11.15 per cent, to $4.70.
Downer will be entitled to compensation for the contract ending in September this year, instead of June 2016.
BHP coal president Dean Dalla Valle said the action was necessary and flagged more cost cutting to ensure the viability of its coal business.
“The coal industry is undergoing a difficult transition and to be globally competitive we have to reset the cost base of the business,” he said.
Mr Brodsky rejected the suggestion workers were over-paid and blamed large miners such as BHP for the weak coal prices because they had flooded the market to squeeze out competition.
“We worked with Downer over the last month to reduce costs and keep people employed but it still wasn’t enough for BMA,” he said.