Resource companies are facing renewed pressure to cut spending and investor payouts after a deepening commodities rout erased billions of dollars in shareholder value on Thursday.
Oil and mining companies that expanded rapidly over the past decade when commodity prices soared have already slashed tens of thousands of jobs and mothballed billions of dollars of projects. Now they must search for new savings as their long-held hopes of rebounding commodity prices fizzle on weak Chinese demand.
Mining companies ‘are still reacting to the reality that China did not turn out to be the picture of ever increasing demand people thought,’ Lourenco Goncalves, chief executive of Cleveland-based iron-ore miner Cliffs Natural Resources Inc., said in an interview Thursday.
Glencore PLC and Anglo American PLC have slashed their dividends – a step big companies are loath to take for fear of alienating big shareholders – after stock prices plummeted over cash-flow and debt concerns. The world’s biggest miner, BHP Billiton Ltd., is facing similar pressures as iron-ore prices drop and as it contends with the fallout from a deadly mine-dam breach in Brazil last year. A BHP spokeswoman declined to comment.
Oil companies went through a big boom cycle over the last decade, but they are now ‘in another one that’s going to be down for a while,’ BP PLC Chief Executive Bob Dudley told the BBC in an interview aired over the weekend. A BP spokesman said the comment is in line with Mr. Dudley’s comments last year.
This post was published at David Stockmans Contra Corner on January 8, 2016.
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