One week ago we were shocked to learn [10]that while all other commodity miners, first and foremost Glencore, were copycatting US shale producers and scrapping capital spending as well as production across virtually every commodity class, one company would buck the trend when the world's second largest miner Rio Tinto said it would not cut copper production, adding that it would be "illogical to hold back output and leave space in the market for higher-cost rivals."
"Why should I make cuts?” asked Rio Copper & Coal Chief Executive Officer Jean-Sébastien Jacques rhetorically.
The logical answer to that question is that being constrained by the same labor costs as all his peers, Rio Tinto would have no choice but to limit the cash outflow.
Logical, that is, assuming we had all the necessary information. We did not.
Thanks to Xinhua [11], we have now learned something fascinating - in its attempt to evade the shackles of conventional fixed and variable costs, Rio Tinto has decided to begin eliminating humans from its "workforce" altogether.
According to the Chinese state media, Rio Tinto has started using automated, driverless trucks to move iron ore in its Pilbara mines, controlled from an operations center 1,200 kilometers away in Perth.
Xinhua reports that "the world's first commercial implementation of the technology removes high risk, repetitive roles which expose employees to fatigue while also reducing significant operating costs and maintaining consistency, said Rio Tinto Yandicoogina operations manager Josh Bennett."
"One of the biggest costs we have got it maintaining mobile assets, so we spend a lot of time on our operator training, education," Bennett told the national broadcaster ABC.
Rio Tinto now has 69 driverless trucks operating 24 hours per day, 365 days per year, estimating a saving of 500 work hours per truck per year.
"So, there is obvious capital savings, in terms of setting up camps, flying people to site, there is less people so there is less operating costs, but there are some costs that come into running the system and maintenance of the system as well," Bennett said.
It's not just well-paid drivers that suddenly became obsolete: the resources giant is also trialling unmanned trains and robot drills, aiming for a roll out of the machines to as many mine sites as possible in the next year.
And where Rio Tinto is boldly going, all of its competitors are sure to follow: rivals BHP Billiton and local middleweight Fortescue Metals are also in on the act, trialling similar technology at their mines.
While we were surprised at this development, others said this was a logical evolution in the displacement of humans with unpaid robotic replacement.
Local market analysts have said the shift to autonomous vehicles was to be expected if Australian miners wanted to remain competitive through the cycle following "unrealistic" wage increases and increased scrutiny of safety concerns. Though the resource sector is developing driverless technology in a commercial closed circuit enterprise, it is in fact the automotive industry that is leading the technological advances.
"Obviously it's not public because there is a lot of money... and it's a very competitive industry with different automotive manufacturers, therefore they keep it behind closed doors," University of New South Wales associate professor of industrial automation and engineering, Jay Katupitiya, told Xinhua on Monday.
So if thousands of commercial drivers find themselves without a job in the coming months and years, thanks the likes of Tesla, Apple and Google, who are "streamlining" even more costs, and creating massive "synergies" for shareholders.
Global automotive manufacturers have recently created a new battleground in the technology market against the likes of Google and Apple, snapping up software experts in the race to develop a self-driving car for the consumer market.
U.S. Secretary of Transportation Anthony Foxx, on the sidelines of the Frankfurt Auto Show in September, said he expected driverless cars to be widespread operation throughout the world within 10 years.
High-end electric automotive manufacturer Tesla has taken the realization of that expectation a step further by releasing a software upgrade for the Model S four-door saloon's autopilot system, to be released in European and Asian markets this week. The upgrade allows its cars to automatically change lanes by the touch of the indicator, managing speed and even hit the breaks.
There are two clear outcomes of this technological innovation, one which we previewed back in 2012 with "I, Not Robot: Why The Rise Of SkyNet Leads To Automatic Unemployment For The People [12]."
- The first is that the commodity mining space is about to see an unprecedented wave of layoffs, crushing the personal income of millions of households and leading to yet another surge in unemployment.
- The second, is that the deflationary wave in the commodity sector is not only here to stay, but is about to get even worse as several layers in overhead costs are about to be eliminated, in the process lowering the breaking extraction costs for all commodity classes substantially lower.
The bottom line is that any company that does not follow in Rio Tinto's footsteps is doomed to a slow, miserable, cash-burning death, even if it means another major deflationary wave is about to be unleashed across the commodity sector, and "forcing" central banks around the globe to engage in far more easing in the years ahead as one after another central-planner desperately looks for the source of global deflation when it is right there, in front of their eyes.
