A specialist mining recruiter’s opinion of where we sit in the mining cycle, and some observations on the current state of play
Many readers of the Bulletin are longstanding resources professionals who have seen the ups and downs of at least one boom and bust. Most of us have lived through the last decade and recall only too well the deep and debilitating effects of the recent savage downturn. Most recall – perhaps with a wry smile – the heady excesses of the last boom. The excesses of the previous boom created a lot of unsustainable behaviours and attitudes, both by individuals and corporations alike.
The boom was of course followed by the bust, and everyone has a story about the reality of the situation setting in. Many professionals are still recovering now. Some left the building and haven’t been seen since. As an industry, we are arguably still paying the price now (but that is another topic requiring a lot more space).
So as you reflect on that roller-coaster ride, are you getting a sense of déjà vu?
For most of you, I’m sure the answer is yes. Every cycle is different, and so are everybody’s individual circumstances, but it seems everyone has the sense that we are ‘back on’. So does this mean we are heading for the same thing again, or will it be different this time because the world is a different place and the macro-environment has changed?
Paradoxically, I believe the answer to both these questions is also yes.
To help understand where we are in the mining cycle, and what this means for professionals, I have created the Mining Recruitment Clock (Figure 1). I understand that for many, the whole recruitment cycle might be unappealing, and am also aware that recruiters generally do not have a good name (that’s another story again). However, it’s fair to say recruiters’ activities are very much a reflection of what’s happening in the market, and so I believe there is value in examining where we are on the clock.
Danger signs and warnings – the macro environment
There is still some notable fragility in world markets. One end result is that resources stocks are notably skittish and have been for about a year. Just take a look at the performance of small to mid-cap ASX resource stocks. At the time of writing: awful. I suggest that, if this was a true boom of the type we remember, that part of the market would be running hot too, but for now it’s not. If that continues, it may translate in turn to lower confidence, less spending, worse sentiment, less investment… (you can put all those in any order you like by that stage – they may all feed off the other). Let’s hope that doesn’t happen and what we’re seeing there is a bump in the road, not the end of a nice upturn.
Despite the warnings, for now it’s all systems go. There’s too much good momentum to stop this big train right now and we can expect the employment outlook to keep running hot for some time to come – it’s quite likely it will get even hotter.
This ramp-up to boom is different
This boom feels different to those in the past for a few reasons. Here I want to discuss two notable differences.
1. Mining houses have been more cautious and conservative in their spend this time around
Following the last boom, investment in projects and spending in general has been a lot slower and more disciplined; there’s not a ‘get it out of the ground at all costs’ dogma that we know leads to super-inflationary practices and paying whatever it takes for goods, services and labour. Maybe this is because the outlook is more uncertain this time – with China, global trade wars, commodity price fluctuations and concerns about economic growth. But maybe it’s a little simpler – perhaps the more cautious approach is due to the raw memory of the big downturn and not wanting to make the same mistakes again. Either way, it’s a slower and steadier ramp-up. It may not be as exciting but surely this slightly more conservative approach is good, and hopefully the inevitable downside to this upswing will be more manageable.
However, in terms of employment there are some cracks appearing that may threaten the notion of a nice, sensible steady ramp-up, as outlined below.
2. This time we are competing with an infrastructure boom
Do you know how hard it is to find a geotechnical engineer at the moment? Well a good number of them have left mining (can you blame them?). Many are to be found in civil tunnelling projects and the like, mostly based in major capital cities and not in regional or remote towns and areas where the majority of mining projects are based. As much as the remote lifestyle is great for some, and a tremendously respected, vital part of our industry, the reality is that it is very hard to attract people to remote regions when city and coastal-based alternatives are available.
But of course the mines will become more desperate, the consultants will charge more and bingo… inflationary desperation and the ‘craziness’ of the past boom is back on. There are other examples across other commodities and disciplines.
I’m not going to go deeply into the skills shortage reality but – like last time – we are smack bang in the middle of it again and all the signs are that it may even be worse this time. Why? For one, because this time there has been, and will continue to be, fewer graduates, arguably due to the resources industry’s perceived environmental and sustainability performance and the industry’s lack of glamour. I’m not saying the issue of dwindling graduates can’t be addressed in future, but frankly I believe it’s too late for the next few years due to the complexity of the problem.
Here’s a scary thing: as mentioned before, I think we all agree that mining is ‘back on’, especially in operations. And this is before we have an influx of new projects. The emerging employment shortage is really just off the back of upgrades to existing mines – what about new mines? Generally they’re not online yet, and when they are – look out. I predict that this skills shortage will go to another level yet again.
So what time is it on the mining recruitment clock?
That depends where you sit in the industry. Operations are much more advanced on the clock than corporate offices. Consultants are back on, but things appear dire in the blue-collar world. It of course varies based on where you are geographically, how choosy you are with your expectations and how you’re perceived by the market.
Here’s some of my observations on the clock and the current state of play
9pm – return of the influx of overnight recruiters
Yes, this is happening again. The statistics are overwhelming that mining is the key growth area while other industries are lagging, so it seems almost every opportunistic recruiter is jumping on the bandwagon. There are instant experts everywhere, but we know from experience that bad practices can ensue. My advice to you as a candidate/client is to be careful. Check for credibility and base your engagement of a recruiter on their knowledge and their loyalty to you.
10pm – Pay increases and recruiter fees increase
Both are starting to happen, most notably the former. It’s certainly not anything like the last boom (yet) but there are signs of ‘we’ll pay what we have to’ coming back into play.
Pay increases are still not like the last boom yet, but they are getting there. Money is starting to talk more as finding the right person gets harder and this is happening for higher level roles in many instances.
Recruiter fees are increasing marginally but it’s nothing like last time. However, another dynamic is at play as the recruitment industry undergoes a structural change of its own. With LinkedIn, other social media and general access to data for everybody in this new digital world, companies will continue to source their own people as much as possible. This affects recruiters in general. One good effect is that it weeded out a lot of the bad ones! However, some of them are starting to come back. That has in turn made it harder to do business, so it has driven fees down. They are still down, compared to the last boom, but on the increase nevertheless – it’s probably a direct reflection of the industry itself, which is the point of raising this topic.
Those greedy 11pm behaviours – are we there yet?
No, not yet. There are elements of it, for example companies are advertising and getting no responses; there’s a smattering of all those things, depending on where you are but we’re not at those giddy heights of 2007 or 2011. Is it going to happen? Well it doesn’t have to. Every cycle is different and nothing is set in stone, but all the indicators are there that we are charging headlong towards a right royal mining employment boom. The catch is, no-one knows when the ride will stop.
How long might all this take?
It is difficult to say. History shows these cycles always happen, but you can’t set your watch to them. Others will have different opinions depending on what part of the market they are in, but in my opinion it’s a bit after 9 pm in my world. Let’s hope it stays right there for a long time.
So what do you do about all this?
Make hay while the sun shines, maintain loyalty to good people, don’t get carried away with greed and arrogance and prepare for the down times. I believe things are looking good for some time to come.