Contractors caught in BHP Billiton’s crosshairs

BHP Billiton will cut costs in its coal division by slashing contractor spending, according to the company's May 29 investor report.

BHP's Queensland coal production has entered a "challenging environment," one which includes: a substantial drop in coal prices; increased royalties and the introduction of a carbon tax; cost inflation of contractors, labour, consumables and accommodation; persistent strength of the Australian dollar.

Target cost savings in this tough environment are said to be "broad based," but it looks as though contractors will be hit the hardest.

Coal miners across Australia have been cutting costs. Xstrata Coal (LON:XTA) began to reduce its Australian workforce by firing its first 40 permanent employees out of the 600 announced cuts.

Mine equipment companies are also reducing headcounts. Joy Mining Machinery recently let go 32 workers from its New South Wales (NSW) Australia plant, citing industry downturn.

To read the full investors report, click here.

Images: BHP Billiton