Chile’s Codelco to cut top positions in response to weak copper prices
Chile-owned Codelco, the world’s top copper producer, will have to start cutting managerial positions as a dramatic cumulative decline in the price and demand of the red metal has taken a toll in the company’s balance sheet.
Speaking to local newspaper El Mercurio (in Spanish), chief executive Nelson Pizarro warned Codelco is ready to “cut costs to the bone,” and revealed the layoff process has already started, though he didn't provide details.
One of the first steps will be to cut about 25% of the executives at its Salvador division, where there are no collective agreements made with unions.
Plunging prices have forced top producers to consider cutting production, delaying new projects and slashing jobs to save money and mitigate oversupply.
Early this week, mining and commodities giant Glencore (LON:GLEN), unveiled a $10 billion package of debt-reduction measures, which include issuing up to $2.5bn of new shares, cutting dividends, selling assets and looking to offload a stake in its agricultural business to a third party.
Glencore also said it plans to suspend production at its copper mines in the Democratic Republic of Congo and Zambia, in a move that it says will take 400,000 tonnes out of the market and potentially provide a boost to prices.
The cuts are the deepest announced yet in the copper market, but they do add to a growing producer response to low prices, which dropped below $5,000 a ton in August for the first time since the financial crisis. In less than four months prices for the industrial metal have sank 25%.
Freeport-McMoRan (NYSE:FCX), the world's largest publicly traded copper miner, said last month it would slash its mining employees and contractors by 10%. It also plans to suspend operations at a mine named Miami in Arizona and decrease output at both its Tyrone mine in New Mexico and its majority-owned El Abra mine in Chile.
Codelco’s board will hold an extraordinary meeting on Sept. 29, after which it is expected to reveal more details on the planned cuts. The company is hoping to cut costs by around $1 billion this year and is 60% on its way to achieve that target.