It is reported that mining contractors and suppliers are set to come under even more pressure after BHP Billiton iron ore and coal boss Marcus Randolph hinted at intensified efforts to bring down the miner's Pilbara costs by squeezing the margins of its major suppliers.

It came as BHP also dropped its aspirational target of producing 450 million tonnes of iron ore in the Pilbara. Instead, BHP is discussing a target of more than 300 million tonne per annum, effectively giving up on more than USD 15 billion in annual sales revenue based on current prices.

Mr Randolph delivered a warning to BHP's contractors said that their days of margin growth are over. This has been a great time to be a supplier to the mining companies, to be a contractor to be an EPCM provider. All of those companies have seen margin expansion over the past 5 to 8 years.

Listed mining contractors have been heavily sold over the past few months as big projects were axed or delayed. NRW Holdings and Calibre have been hit by pull backs by BHP and Fortescue Metals Group and Mr Randolph yesterday flagged more pressure on suppliers that could further cut their earnings.

Mr Randolph said that "What is happening now is that people are realizing that those days of margin growth are over and BHP Billiton is aggressively seeking to bring down the price of those goods, largely sucking out the excess margin that these people had over the past few years."

Source - thewest.com

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