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MINING PRODUCTIVITY:MINING PRODUCTIVITY:WHY HAS IT FALLEN?WHY HAS IT FALLEN?
WILL IT RECOVER?WILL IT RECOVER?
John E. TiltonJohn E. TiltonPontificia Universidad Católica de ChilePontificia Universidad Católica de Chile
and Colorado School of Mines and Colorado School of Mines Email: [email protected]: [email protected]
PUC Department of Mining Engineering
Santiago, ChileApril 26, 2013
LABOR PRODUCTIVITY 1985-2011LABOR PRODUCTIVITY 1985-2011CHILEAN COPPER INDUSTRYCHILEAN COPPER INDUSTRY
(Tons per Own Worker)(Tons per Own Worker)
Source: Cochilco
SIMILAR GLOBAL TRENDSSIMILAR GLOBAL TRENDS
•Australia, Canada, US, and other mining Australia, Canada, US, and other mining countriescountries• Coal, iron ore, and other mineral Coal, iron ore, and other mineral commodities commodities • Both labor and multifactor productivityBoth labor and multifactor productivity
PREVAILING VIEWPREVAILING VIEW
• Falling productivity likely to continue over Falling productivity likely to continue over the long runthe long run
• New technology no longer able to offset New technology no longer able to offset depletiondepletion
• China’s growing demandChina’s growing demand• Less attractive depositsLess attractive deposits• Less technological changeLess technological change
AN ALTERNATIVEAN ALTERNATIVEPERSPECTIVEPERSPECTIVE
• Falling productivity is mostly cyclicalFalling productivity is mostly cyclical• Result of high prices and efforts to Result of high prices and efforts to expand output rapidlyexpand output rapidly• Productivity likely to rise if prices fallProductivity likely to rise if prices fall
RECENT RESEARCHRECENT RESEARCH
• 2012 RioTinto request• Interpretative survey of the literature
over the past several decades• Copper, aluminum, iron ore and coal
FOCUS AND APPROACHFOCUS AND APPROACH
• Two central questions– What are the major drivers of changes in mining
productivity?– Are recent changes largely secular or cyclical?
• Approach – – Identify determinants of productivity and the
extent to which they may vary cyclically– Empirical evidence – does productivity tend to
rise and fall with commodity prices?
MAJOR DETERMINANTSMAJOR DETERMINANTS
• Innovation & technology– Major vs minor technological advances– IT technology– Embodied vs disembodied tech change– Learning by doing
• Resource quality– Ore grades– Stripping ratios– Other
OTHER DETERMINANTSOTHER DETERMINANTS
• Government regulations
• Worker quality
• Economies of scale
• Capacity utilization
• Unplanned stoppages (eg, strikes)
CYCLICAL DETERMINANTSCYCLICAL DETERMINANTS
• Innovation
• Resource quality
• Worker quality
• Unplanned stoppages
• High cost and inefficient mines close when prices decline
• Cost control vs output
EMPIRICAL EVIDENCEEMPIRICAL EVIDENCE
• Copper – Chile in recent years– US in 1980s
• Metal Mining - Canada 1989-2006
• Iron Ore - US and Canada in 1980s
• Coal - US in early 1970s
LABOR PRODUCTIVITY 1985-2011LABOR PRODUCTIVITY 1985-2011CHILEAN COPPER INDUSTRYCHILEAN COPPER INDUSTRY
(Tons per Own Worker)(Tons per Own Worker)
Source: Cochilco
CHILEAN LABOR PRODUCTIVITYCHILEAN LABOR PRODUCTIVITYAND THE COPPER PRICE, 1985-2011AND THE COPPER PRICE, 1985-2011
(Tons per Own Worker, 2012 US$ per Ton)(Tons per Own Worker, 2012 US$ per Ton)
Sources: Cochilco, UNCTAD, World Bank
Productivity
Price
CHILEAN LABOR PRODUCTIVITYCHILEAN LABOR PRODUCTIVITYAND THE COPPER PRICE, 1985-2011AND THE COPPER PRICE, 1985-2011
(Tons per Own Worker, 2012 US$ per Ton)(Tons per Own Worker, 2012 US$ per Ton)
Sources: Cochilco, UNCTAD, World Bank
Productivity
Price
CHILEAN LABOR PRODUCTIVITYCHILEAN LABOR PRODUCTIVITYAND THE COPPER PRICE, 1985-2011AND THE COPPER PRICE, 1985-2011
(Tons per Own Worker, 2012 US$ per Ton)(Tons per Own Worker, 2012 US$ per Ton)
Sources: Cochilco, UNCTAD, World Bank
Productivity
Price
PRICES AND PRODUCTIVITY METAL ORE PRICES AND PRODUCTIVITY METAL ORE MINING, CANADA, 1989-2006MINING, CANADA, 1989-2006
Sources: Bradley & Sharpe, 2009
LABOR PRODUCTIVITY IN THE U.S. COPPER LABOR PRODUCTIVITY IN THE U.S. COPPER INDUSTRY, 1975-2001INDUSTRY, 1975-2001
Source: Tilton, 2003
COPPER HEAD GRADESCOPPER HEAD GRADESUS COPPER INDUSTRY, 1971-1993US COPPER INDUSTRY, 1971-1993
Source: Tilton and Landsberg, 1999
LABOR PRODUCTIVITY AND PRODUCTION IN LABOR PRODUCTIVITY AND PRODUCTION IN THE U.S. IRON ORE INDUSTRY, 1970-1995THE U.S. IRON ORE INDUSTRY, 1970-1995
Source: Schmitz, 2005.
PRODUCTIVITY IN THE U.S. COAL INDUSTRY, PRODUCTIVITY IN THE U.S. COAL INDUSTRY, 1947-1991 1947-1991 (1972 = 100)(1972 = 100)
Source: Ellerman and Berndt 1998 as cited in Darmstadter 1999.
PRODUCTIVITY IN THE U.S. COAL PRODUCTIVITY IN THE U.S. COAL
“During the 1970s nearly everything seemed to conspire to reduce labor productivity, but the largest effect was attributable to the rising price of coal. . . Both statistics and anecdotes suggest that the first response of coal-mining operators was almost literally to throw labor (and other inputs) at the coal face. The inevitable result was lower productivity.”
Souce: Ellerman and others, 2001, p. 405
FINDINGSFINDINGS
• History suggests a strong cyclical component in productivity trends
• When prices rise, productivity falls, and vice versa
• So mining productivity is likely to rise again when prices falls
IMPLICATIONSIMPLICATIONS
• Rising productivity means mining costs may decline in the future
• So copper prices could also fall• Not necessarily bad news for
producing firms and countries• And, clearly good news for
consumers and society as a whole
REFERENCESREFERENCES
Darmstadter, J. 1999. Innovation and productivity in U.S. Coal Darmstadter, J. 1999. Innovation and productivity in U.S. Coal Mining, in Mining, in Productivity in Natural Resource Industries, Productivity in Natural Resource Industries, edited by edited by Simpson, R.D., Resources for the Future, Washington, DC.Simpson, R.D., Resources for the Future, Washington, DC.
Ellerman, A.D., Stoker, T.M. and Berndt, E.R. 1998. Ellerman, A.D., Stoker, T.M. and Berndt, E.R. 1998. Sources of Sources of Productivity Growth in the American Coal Industry, Productivity Growth in the American Coal Industry, MIT Center for MIT Center for Energy and Environmental Policy Research, Working Paper no. MIT-Energy and Environmental Policy Research, Working Paper no. MIT-CEEPR WP-1998-004, March.CEEPR WP-1998-004, March.
Schmitz, Jr., JA, 2005. What determines productivity? Lessons from Schmitz, Jr., JA, 2005. What determines productivity? Lessons from the dramatic recovery of the US and Canadian iron ore industries the dramatic recovery of the US and Canadian iron ore industries following their early 1980s crisis, Journal of Political Economy, pp. following their early 1980s crisis, Journal of Political Economy, pp. 582-625.582-625.
Tilton, JE, 2003. Creating Wealth and Competitiveness in Mining, Tilton, JE, 2003. Creating Wealth and Competitiveness in Mining, Mining Engineering, September, pp. 15-22.Mining Engineering, September, pp. 15-22.
MINING PRODUCTIVITY:MINING PRODUCTIVITY:WHY HAS IT FALLEN?WHY HAS IT FALLEN?
WILL IT RECOVER?WILL IT RECOVER?
John E. TiltonJohn E. TiltonPontificia Universidad Católica de ChilePontificia Universidad Católica de Chile
and Colorado School of Mines and Colorado School of Mines
Email: [email protected]: [email protected]
PUC Department of Mining Engineering
Santiago, ChileApril 26, 2013
LABOR PRODUCTIVITY AND PRICES FOR LABOR PRODUCTIVITY AND PRICES FOR ALUMINUM, VARIOUS COUNTRIES, 2000-ALUMINUM, VARIOUS COUNTRIES, 2000-
20102010
