Australia’s mining services industry was dealt yet another brutal blow last week when mining heavyweight BHP Billiton Limited (ASX: BHP) informed Macmahon Holdings Limited (ASX: MAH) that it would be relieved of its duties at the “Orebody 18” iron ore mine.
By taking the operations in the Pilbara region in-house, BHP’s costs will decrease as the profit margin charged by the mining services company will be removed. Roughly 200 jobs will be affected, although the company said in a statement that most of them will be given the opportunity to relocate to other Macmahon projects.
Although there is the belief that Macmahon’s services could be called upon by BHP in the future, the news really couldn’t come at a worse time for the industry. Just weeks ago we saw the collapse of Forge Group Limited (ASX: FGE), while there are strong signs that others could soon be on the way out too.
Given the heavy falls experienced in the sector in recent years, investors may be thinking there are unbelievable opportunities ripe for the picking. My advice is to steer clear altogether – things are likely to get much worse before they get better.