What recent news really means for engineering jobs in Australia

Iron Ore price may have jumped, but the  big picture 

offers less cause for confidence. 

Recent surges in iron ore prices may be a comfort to some, but before anyone starts getting too excited, they should look to the wider view and the inevitability of long term decline in need from China.

This month the news is good. A 6.7% jump resulting from news of approvals in Chinese Infrastructure projects. It’s enough to put the price back over $100 a tonne, which though well short of the $150 high, is at least over the recent $90 level.

There remains however, an inevitable truth to be faced. China’s economy is shifting. As the Chinese population starts to consume more of its own products, rather than relying on external markets for exports, its need for steel and the raw materials used to produce it, will drop and drop.

Steel futures in Shanghai are dropping as we speak. While China continues to overproduce steel, the $150bn in approved projects will not be enough to build confidence in future need. Only cuts in production at Chinese steel mills will stabilize the price.

But in a market that’s seriously fragmented who’s going to do that? Who’s going to compromise their market share? And what are the state run facilities going to do about the jobs it will cost? The answer is that everyone is going to hope for a solution somewhere else in the supply chain.

Today Fortescue will ask lenders to waive debt covenants. As the world’s fourth largest iron ore producer, the company is suffering severely from the weak demand in China, its largest market. Fortescue has avoided raising equity capital, hoping instead for a rebound in commodity prices.  

Meanwhile, confusion reigns in India. In Goa, ‘serious illegalities and irregularities’ in mining operations have led to a freeze in production, as New Delhi continues to seek drops in exports to fulfill domestic need. India’s exports to China have dropped significantly – by 40% April - June.

So what does all this mean for the Australia mining job market? Time will tell, but the outlook is not immediately positive. It is the demand for minerals that has protected the Australian economy from the worst of the global financial crisis. But the fall in commodity prices, the closure of mines and - most significantly for engineers – the postponement and cancellation of expansion plans, will start to pull this protective blanket off the national economy.

The good news is that not everything is about mining projects.  Demand for engineers on LNG projects remains strong and our clients have continued to seek talent for ongoing expansion. As one door closes another one opens.

But there is a truth to face here – China will not be the magical bodyguard of the Australian economy forever. 

No end in sight for Australian LNG jobs as US check book remains on the table

We get a lot of questions about the future of LNG for Australian engineering jobs. And I do mean a lot. Few things seem to occupy the minds of our industry colleagues across the world as much as the potential that LNG projects represent for the Australian economy and for the immediate future of global engineering jobs. Not since the 2003 spike in inquiries provoked by the Iraq reconstruction project, or the mass interest in building jobs for the London Olympics have I seen this much interest on one area of the global industry.

For now, Australia is at the centre of the engineering world. And it is foreign investment from the USA that is really driving the expansion, with relatively little of the money coming from China. 

Fred Hochberg, Chairman of US Ex-Im bank and a close economic advisor to President Obama has been in Australia this week to enforce the US’s commitment to sustained investment in the region, in the face of renewed efforts from China to lead spending over here.

"US investment is frankly far greater than any Chinese investment in Australia - it's the No 1 source of FDI (foreign direct investment) into Australia," said Hochberg while visiting Australia Pacific LNG on Curtis Island.

So America’s message is clear – We want you to know we care about you. Low interest loan money currently flooding in from the US is a clear signal that the US sees Australia as a safe bet for the long term. Investments from Ex-Im have been welcomed far more readily here than those coming in from China. The low interest loan money is linked to projects with heavy involvement from US companies like Bechtel and GE, so it’s a popular strategy within the US.

Cumulative US investment topped $550bn in Australia over the last seven years, compared with just $21b from China, Chevron's decision to push forward with its gigantic Gorgon and Wheatstone projects in Western Australia is a significant driver of this investment.

To justify this level of expenditure, we have to supply the human capital to get the jobs done. Where are the skilled labor jobs and engineering jobs going to be filled from?

The reality is that just as the investment money is coming from the US, a lot of the skills we need will have to come from outside too. If we handle it right, it will be good for us in the long term. 

We need to bring in resources from outside Australia to execute projects now and to help train and develop the next generation of Australian engineers who can fill engineering jobs in LNG for the next decade. The time is now. 

The biggest mistake made in meetings...

Everyone’s an expert.

Do you ever notice that? When you’re sat in meetings on more or less any subject, the people sat round the table always seem to have plenty of opinions, often expressed with the certainty of fact, but very few have a lot of questions to ask.

I wonder why that is. In all circumstances in life where groups of people are trying collectively to reach a correct decision, the process is always question and answer based. Courtroom trials are based exclusively on questions and answers, as are committee hearings, enquiries and tribunals.

Asking questions is not just a practical necessity, it’s also a basic human courtesy. It’s the foundation of human interaction, for strangers as much as for old friends.

Do you come here often? What team do you support?  How are Mary and the kids?

Virtually all conversations are question and answer led, until you’re in a meeting room with eight of your colleagues. Then suddenly everyone seems far more interested in asserting their own opinion than they are in soliciting someone else’s.

Why do we indulge this? The most awful people we meet socially are those who never ask questions. You know the type. You’re at the pub and every time a line of conversation emerges, this person can only reference it in some way back to themselves. They are not interested in taking in, only in giving out.

“I’m very excited, I’m going to Tunisia next month.”

“I went to Tunisia last year.”

“I just got a text from my friend, she’s living in London at the moment.”

“When I was living in London I found the weather was just too much.”  

It’s easy to do. Relating things back to personal experience is natural, but it’s also intrinsically selfish and a real social turn off. How much better is it to ask questions? Imagine if the same person answered each statement with a question…

“I’m very excited, I’m going to Tunisia next month.”

“Really? Why did you choose Tunisia?”

“I just got a text from my friend, she’s living in London at the moment.”

“Where abouts is she staying?”

A person who asks questions is immediately more likable and will ultimately accomplish more. Asking questions makes the person you’re talking to feel like you’re interested and it gives you more information. When it comes to business, information is almost always useful in making progress and problem solving.

We all need to ask more questions and listen to the answers. There is a danger that you're asking less questions than you actually think you are. Paying close attention to how you behave, and whether you're a listener or a talker is very important. As an old poker-playing friend of mine says, if you look round the table and you can't see who the loser is, then it's you.

What do you think?




Trevor Burne is Managing Director of Talascend. He blogs about Australian engineering jobs, and issues affecting Australian Engineers.