Local business shouldn’t carry big
Wednesday 15 February 2017
Chairman of the Resource Industry Network (RIN) Tony Caruso says big miners need to revisit the hyperextended payments terms they forced on their suppliers at the bottom of the mining downturn.
Just over twelve months ago both BMA and Rio Tinto outraged local businesses when they decided to double the time they would take to pay their bills from 30 to 60 days.
In reality however, that meant some businesses are still waiting more than 120 days to get paid by the time "delays" and other “issues” are resolved in the invoicing process.
Despite the decades of mining cycles in Central Queensland, this is the first time this sort of payment squeeze has been applied by the big miners.
However, with few viable alternatives, the struggling mining support sector has reluctantly accepted them.
However now, with stronger coal prices supporting profitable operations across the coalfields, Mr Caruso says it's important that pressure is applied to ensure that these late payment terms don’t become enshrined.
“Obviously a lot of big miners are returning to profitability, driven by both better prices and lower costs,” he told Shift Miner.
“As yet we haven’t seen that translate into a return to better, or more traditional payment terms, but the sense I get is that it might be a little too soon for companies to feel confident that the current trading conditions are here to stay.
“However, having said that we will certainly be keeping the pressure on these companies to reconsider them.
“It’s not fair to expect small business to carry these costs for large companies.
“Forcing SME’s to have so much money tied up in working capital stops them investing in jobs, R&D and other investments that are important for the whole industry to remain competitive.
“We need to keep the pressure on about this issue because we are concerned that now that businesses have adjusted to it, there might be the temptation by big miners to leave the terms as they are.”
“And that’s bad for the whole economy, not just those dealing directly with the big miners.”
The terms of trade issue is one concern, in an otherwise optimistic outlook for the region's mining support sector.
Stronger coal prices have translated into a significant increase in work in the last three months, with the best start to a calendar year for a long time.
Mr Caruso says some of the long anticipated “maintenance tsunami” has arrived.
“Very much so,” he said.
“If you look across the mining services businesses, everyone is absolutely struggling with the labour shortages, and that is evidenced by the number of jobs ads around.
“But there is always a time lag between a downturn and when the work really starts to flow.
“And I think that is the stage we are in right now.
“It’s going to take sustained profitability for the big companies to start offering contracts and positions with some tenure in them.
“But a lot of people are going to be very cautious about coming back.“It’s been a very traumatic time.”
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