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BHP to cut jobs in iron ore as China slows

BHP Billiton has matched the World Bank's pessimistic outlook for the Chinese economy, by confirming that job cuts are afoot within its flagship iron ore division.

Confirmation that BHP has started redundancy and redeployment talks with workers in its iron ore division coincided with the latest World Bank report predicting the slowdown in the Chinese economy will be ''more pronounced'' than expected.

The bank predicted economic growth in the East Asia and Pacific region could slow a full percentage point this year from 8.2 per cent last year to 7.2 per cent, its lowest rate in 11 years.

Weak exports and lower investment growth was expected to cut China's economic growth from 9.3 per cent last year to 7.7 per cent this year.

''China's slowdown this year has been significant, and some fear it could accelerate,'' the World Bank said.

''Economic momentum is expected to be weak during the coming months with limited policy easing, a property market correction, and faltering external demand.''


Weakening conditions in China spell bad news for Australian mining companies, most of which sell the bulk of their products to China.

Slumping commodities prices - particularly for iron ore and coal - have already produced Australia's worst trade deficit in more than four years, and BHP said changes were under way within its iron ore division.

''BHP Billiton has completed a review of its current organisational structure to ensure it is aligned to the BHP Billiton design principles and correctly sized for the market conditions in which we operate,'' a company spokesman said.

''Every effort will be made to redeploy impacted people across the

business and, if necessary, the broader BHP Billiton Group. A person will only be made redundant where a suitable role cannot be found or they choose to take a redundancy package.

''It is too early to say how many people will be made redundant.''

BusinessDay believes about 200 jobs will be lost in total once the redeployment efforts are complete.

Cuts to job numbers have already been felt this year at BHP's other divisions, including coal, nickel and manganese.

But the spread to BHP's iron ore division - one of the most profitable divisions within one of the nation's most profitable miners - shows that virtually no aspect of the mining sector has been left untouched by the current slowdown.

BHP's iron ore division raked in more than $US22 billion in revenue last year and more than $US14 billion in earnings before interest and tax.

Plans to spend $US20 billion building an outer harbour at Port Hedland were put on hold in August, and that decision is inextricably linked to the workforce rationalisation that is now under way.

Despite the recent slump in the benchmark iron ore price, most analysts expect BHP's Pilbara profit margins to be in the order of 300 per cent.

The World Bank's gloomy forecast is expected to be complemented today when the International Monetary Fund revises its global outlook. But it was not all bad news in the World Bank report: reconstruction spending in Thailand after last year's floods, along with government spending in Indonesia and Malaysia, was said to be helping to buttress domestic demand in Asia.

''Weaker demand for East Asia's exports is slowing the regional economy, but compared to other parts of the world, it's still growing strongly,'' said Pamela Cox, the World Bank's East Asia and Pacific regional vice-president.