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Category: Mining Industry / Mining (Rural)

Job losses likely for TEMCO plant in Bell Bay, analyst says

Wednesday, 17 Feb 2016 08:26:52 | Emilie Gramenz

A resources analyst believes there is enough optimism in the global market to shield a Tasmanian manganese alloy plant from significant job losses but has warned some cuts are still likely in the next six months.

Key points:

  • Resources analyst warns some job losses likely in "meaningful reduction of costs" plan
  • But analyst says TEMCO manganese alloy plant should be "immune" to significant cuts
  • Manganese alloy in "minor surplus" worldwide
  • TEMCO subject to 11.9 per cent penalty mark up in United States over claims it was undercutting prices

South32, which owns the Tasmanian Electro Metallurgical Company (TEMCO) based at Bell Bay in northern Tasmania, is finalising a major restructure of its operations.

The company, recently demerged from BHP Billiton, has flagged substantial job losses in the face of a $2.4 billion asset writedown.

It is finalising plans to deliver a "meaningful reduction of costs" across several operations including Australian Manganese, which includes TEMCO.

Resources analyst David Lennox from consultancy Fat Prophets said because TEMCO produces manganese alloy, a more valuable product than ore, it may be immune from the worst of the cuts.

"We would think that they'll have a very good look at the Bell Bay alloy smelter and perhaps, at this point in time, leave it to its own devices," he said.

"But we could see some job shedding and certainly some changes in cost structures in the weeks and months ahead."

Mr Lennox said it was likely production volume may slow further, after South32 made cuts to production in the December 2015 quarter.

"When you have a look at the supply of manganese alloy in the globe today, it's probably just in a minor surplus, which means there is more supply than there is demand," he said.

Mining industry yet to bottom


A new report by professional services firm Ernst & Young is predicting a year of forced asset sales ahead for resources firms.

TEMCO is also subject to an 11.9 per cent mark up in the United States, after a preliminary finding in an anti-dumping investigation by the US Department of Commerce.

The probe began in early 2015, after West Virginia's Felman Production LLC claimed large volumes of silicomanganese from TEMCO, then owned by BHP Billiton, had "significantly undercut" prices in the US market.

But Mr Lennox said he did not believe the penalty was having a dramatic effect.

"We think overall it may see some demand filtered off to cheaper sources, but you've got to remember Australia does produce a very high-quality manganese alloy," he said.

"Really in some operations it's the quality you're looking for and the price has to look after itself."

The US Department of Commerce will make a final determination later this year.

South32 will disclose the details of job cuts in its half-year financial results next week.

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