MINING PRODUCTIVITY: WHY HAS IT FALLEN? WILL IT RECOVER?. John E. Tilton Pontificia Universidad Católica de Chile and Colorado School of Mines Email: [email protected] PUC Department of Mining Engineering Santiago, Chile April 26, 2013.
Australia, Canada, US, and other mining countries
Coal, iron ore, and other mineral commodities
Both labor and multifactor productivity
Falling productivity likely to continue over the long run
New technology no longer able to offset depletion
China’s growing demand
Less attractive deposits
Less technological change
Falling productivity is mostly cyclical
Result of high prices and efforts to expand output rapidly
Productivity likely to rise if prices fall
Sources: Bradley & Sharpe, 2009
Source: Tilton, 2003
Source: Tilton and Landsberg, 1999
Source: Schmitz, 2005.
Source: Ellerman and Berndt 1998 as cited in Darmstadter 1999.
“During the 1970s nearly everything seemed to conspire to reduce labor productivity, but the largest effect was attributable to the rising price of coal. . . Both statistics and anecdotes suggest that the first response of coal-mining operators was almost literally to throw labor (and other inputs) at the coal face. The inevitable result was lower productivity.”
Souce: Ellerman and others, 2001, p. 405
History suggests a strong cyclical component in productivity trends
When prices rise, productivity falls, and vice versa
So mining productivity is likely to rise again when prices falls
Rising productivity means mining costs may decline in the future
So copper prices could also fall
Not necessarily bad news for producing firms and countries
And, clearly good news for consumers and society as a whole
Darmstadter, J. 1999. Innovation and productivity in U.S. Coal Mining, in Productivity in Natural Resource Industries, edited by Simpson, R.D., Resources for the Future, Washington, DC.
Ellerman, A.D., Stoker, T.M. and Berndt, E.R. 1998. Sources of Productivity Growth in the American Coal Industry, MIT Center for Energy and Environmental Policy Research, Working Paper no. MIT-CEEPR WP-1998-004, March.
Schmitz, Jr., JA, 2005. What determines productivity? Lessons from the dramatic recovery of the US and Canadian iron ore industries following their early 1980s crisis, Journal of Political Economy, pp. 582-625.
Tilton, JE, 2003. Creating Wealth and Competitiveness in Mining, Mining Engineering, September, pp. 15-22.