– Aussie Boom Towns Go Bust As Iron Ore Prices Crash To Record Lows (ZeroHedge, March 6, 2015):
Dalian Iron Ore prices have been cut in half in the last year (which must mean over-supply and not under-demand, right?). Amid China’s growth target cut, Iron Ore prices there have crashed to below $60 – a record low – and that is having dramatic impacts across many regions. As we recently noted, Aussie gold miners are producing desperately to generate cashflow, but despite the booming housing market in some areas, as Reuters reports,the drop in iron ore and coal prices (the nation’s 2 biggest exports) have led former boom towns to bust as “reality comes into the marketplace.”
As bad as it’s ever been… one-third of 2011 peak credit-enthused levels…
Which has led, as Reuters reports, to layoffs and empty streets in Australia’s boom towns…
When Probo Junio got a visa to work in Australia, he thought he had won a ticket to the good life.
In 2013, the 45-year-old boilermaker left his hometown of Cebu in the Philippines, where he was getting paid about $10 a day, to work in Karratha in Western Australia for $30 an hour. Enough to support his relatives and build a new life Down Under.
What Junio didn’t expect was that Australia’s booming resources industry would go bust less than two years later, taking his job, and leaving him just 60 days to find work or go home.
“It’s very difficult because most of the companies don’t want 457 visa holders,” he said, referring to temporary permits for skilled workers.
Across the country, people like Junio are falling victim to downsizing. Jobs, once plentiful and well paid, are scarce. Real estate prices in boom towns are sinking and even the notoriously high coffee prices in mining capital Perth have levelled off at under $4.
Prices of iron ore and coal, the country’s two biggest export earners, have plunged during the last two years amid falling demand from China, in the wake of its economic slowdown.
Just a few years ago, foreign workers were flooding into Australia, lured by huge pay as the resources industry scrambled to fill positions. Truck driving and cooking jobs offering $100,000 a year made headlines abroad.
But those workers, like Junio, are now hard-pressed to find work, especially if they are on temporary visas. Even permanent residents have to take lower pay.
“There is reality coming into the marketplace about salaries,” said John Downing, who runs global resources recruiting firm Downing Teal, adding that salary expectations have fallen 10 percent to 25 percent.
And while real estate booms in some regions, it’s collapsing in the coal country…
“For Lease” signs are everywhere in West Perth, the headquarters of many mining, oil and gas companies.
“You could shoot a cannon down those streets,” said resources analyst Peter Strachan. “There’s nobody there.”
Commercial vacancy rates in the city are near a 20-year high of 15 percent as resources companies downsize or shut down, said Joe Lenzo, of the Property Council of Australia.
The real estate market has also been hit in the coal country of Queensland, across the continent.
We leave it to one old-timer’s hope to conclude:
It may be the worst of times, but old hands expect things will improve.
“Just as a lot of people thought the boom would never end, some people might think the bust will never end,” said recruiter Downing. “We will go through better times.”
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Coming to a Shale region near you soon…