BHP operations in Port Hedland.
BHP operations in Port Hedland.

Mining contractors face the prospect of further margin pressures because of BHP Billiton's cost-cutting drive.

But BHP's Iron Ore president, Jimmy Wilson, yesterday moved to downplay speculation that consultant recommendations that the company should cut up to 20 per cent of its WA workforce would be fully implemented.

Speaking in Port Hedland on the sidelines of a celebration to mark the billionth tonne of iron ore exported to Japan, Mr Wilson said BHP's management would make the final decision on the extent of further job losses, not its consultants.

With BHP having shed at least 500 WA workers in the past few months, the iron ore boss would not rule out further job losses as the company seeks to bring down its local operating costs.

BHP contractors and suppliers also face more pressure to reduce the price of goods and services, however, with Mr Wilson nominating further focus on its procurement strategy as a key plank in its productivity drive.

Mr Wilson said BHP had no specific target for a head count reduction, but admitted work was still going on to "optimise the size of the organisation".

He said speculation sparked by recommendations from McKinsey for BHP to cut up to 20 per cent of its 16,000-strong iron ore workforce would not necessarily be the end result.

"Consultants always put out projections and they always put out aspirational cases," Mr Wilson said. "At the end of the day management decides what they are going to do."

He said job cuts were only one part of BHP's push to reduce its local costs on a per-tonne basis.

"The first, and most value accretive, is driving more volume through the installed capacity - getting up to 270 million tonnes without deploying major chunks of capital," he said.

"The second is procuring better, buying better. So when deals come up, cutting better deals with our suppliers to get lower costs into the business.

"Third is head count, or people-related productivity initiatives."

BHP president of marketing Mike Henry said this year's iron ore price fall had already been "baked in" to the BHP business model and was a response to slowing growth in steel demand in China, along with a flood of new shipborne iron ore in the market.

The reporter travelled to Port Hedland as a guest of BHP Billiton

The West Australian

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