Saturday, November 29, 2014

China sends thousands of troops to combat Xinjiang violence: Isnt That Overkill

China sends thousands of troops to combat Xinjiang violence

Uyghur men leave the Id Kah Mosque following Eid prayers in old Kashgar, Xinjiang

Thousands of ex-soldiers are to be deployed to villages and towns in China's troubled northwest to counter a spike in deadly inter-ethnic violence and terrorist attacks that has claimed scores of lives this year.
At least 3,000 former members of the People's Liberation Army (PLA) will be shipped into communities in Xinjiang, a sprawling region of deserts and mountains that shares borders with Afghanistan and Pakistan.
Xinjiang, which is home to an increasingly discontented population of Muslim Uighurs, is witnessing a dramatic surge in violence that Beijing blames on separatists and religious extremists but experts believe is also rooted in the social and economic exclusion of Uighurs.
"The situation in Xinjiang is getting worse and the government needs more people to prevent further riots from happening," said Pan Zhiping, an academic from the Xinjiang Academy of Social Sciences.
The initiative to send former PLA troops to Xinjiang follows another Communist Party project to send 200,000 officials to rural areas to collect intelligence on Uighur communities and attempt to improve relations between them and China's ethnic Han majority.
A "people's war" on terror – launched in May – has seen a major deployment of troops across the region as well as a jump in the number of people being executed for terrorist offences.
Since the anti-terror campaign began, at least 21 people have been executed for such crimes in Xinjiang, compared to just five in 2012 and one in 2011, according to an analysis of publicly available media reports.
One hundred and fifteen suspected terrorist groups have been dismantled and 334 people arrested, Xinjiang's government announced last week.
Earlier this month 22 Uighurs – including a number of "underground imams" – were given heavy jail terms in the city of Kashgar for "conducting illegal religious activities."
Such arrests have lead some to question whether a crackdown on Islam as well as terrorism is also under way.
Xinjiang officials are now seeking former troops of "high political quality and military experience" to beef up security in the region, state media announced on Friday. Candidates should be under 30, have no criminal record and be "against separatism and illegal religious activities," according to the Civil Affairs Bureau in Urumqi, the regional capital. Successful applicants will receive salaries of at least 3,000 yuan (£310) per month and help relocating.
The initiative represented the latest phase in the "securitisation of Xinjiang with a clear focus on protecting the Han population," said Dr James Leibold, a specialist on China's ethnic policy from La Trobe University in Australia.
"These attacks have really spooked the Han population in Xinjiang and the Party cannot afford to lose their trust and faith," he added. "Clearly they don't feel they have enough in terms of security folk."
During a recent trip to Hotan, a city in southern Xinjiang that has suffered repeated outbreaks of violence, Dr Leibold recalled seeing around 50 Han Chinese civilians dancing in a public square. Around them stood more than 70 armed police officers with machine guns.
"They just come when the Han come out to dance and when the Han leave, they leave too," Dr Leibold said. "It was pretty weird." 

China's Fruitless Repression of the Uighurs

CreditAssa Ariyoshi
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Last week, a court in China’s far western Xinjiang region sentenced Ilham Tohti, a member of the Uighur minority, to life in prison or the crime of “inciting separatism.” The conviction of this moderate scholar elicited international condemnation; the sentence was an order of magnitude longer than those given to other Chinese dissidents. But, far from being a show of strength, the sentence is a sign of the confusion and desperation behind the government’s policies toward Uighurs.
That Mr. Tohti, an economics professor and a blogger, should become a celebrated political prisoner is a paradox, for he is in many ways a poster child for what the Communist Party hopes more Uighurs will become. Educated, and eloquent in Mandarin, he was a party member from a family closely engaged with the state (his male relatives include members of China’s military and state security organs). He is professional, entrepreneurial and middle class (his family assets amounted to around $130,000 before state confiscation). He is not outwardly religious (most Uighurs are Muslims, but vary in the degree and nature of their observance). He is distinctive mainly in his outspokenness.
Though the Chinese often think of Xinjiang as a remote frontier of deserts and mountains, populated with quaint folkloric natives, it is closely linked to the rest of China and to Central Asia by an expanding transportation infrastructure; the skyscrapers, neon glow, booming commerce and air pollution of Xinjiang’s cities resemble those elsewhere in China; and although, like rural areas throughout the country, Xinjiang’s villages remain poor, the emerging middle class in the cities is scarcely different from its counterparts in other urban centers. Rapid economic development has benefited Uighurs as well as Han Chinese (each group makes up just over 40 percent of the region’s population of 21 million).
Yet the authorities seem puzzled and frustrated that, despite these economic gains, Uighurs remain adamantly Uighur. Sporadic local disturbances are endemic throughout China, but in Xinjiang they are colored by ethno-national and religious sentiments. After a relatively quiet decade, from 1998 to 2007, stability has eroded alarmingly since 2008, with a big, bloody race riot in 2009, sporadic attacks on police stations and representatives of the state and, over the past year, violence perpetrated by Uighurs against random civilians in Urumqi, the regional capital, and in faraway Yunnan Province and Beijing. Xinjiang authorities have responded to violence with an intense crackdown, including house-to-house searches, and a campaign against traditional symbols of identity: veils, head scarves, beards, traditional hats, Ramadan fasting, prayer.
Combined with the recent razing of Uighur architecture in the ancient city of Kashgar and elimination of the Uighur-language educational track from Xinjiang’s schools and universities, these measures seem aimed at repressing Uighur culture. Moreover, the authorities have now doubled down on their post-9/11 tendency to interpret Uighur unrest through a single lens — foreign-inspired Islamic “terrorism” — even when the real causes are local and political.
It is unclear if China’s leaders entirely believe their own propaganda — that all Uighur troubles derive from external sources and are unrelated to government policies — but local and regional authorities certainly benefit from it: Whereas common people elsewhere in China enjoy some de facto freedom to protest official and business malfeasance, Uighurs enjoy no such latitude. In the absence of a free press, Beijing has few sources of on-the-ground information in Xinjiang other than its own self-interested and self-protecting local officials, who can readily justify their mistakes and abuses in the name of fighting “separatism, extremism and terrorism.” No surprise, then, that it was the authorities in Xinjiang, not Beijing, who were most eager to prosecute Mr. Tohti, for he has been arguing that Chinese policies themselves, not simply cyber-radicalization, have been engendering Uighur resentment and violence.
Yet by condemning Mr. Tohti, Beijing has not only subjected itself yet again to international opprobrium, but has denied itself a critical Uighur viewpoint and an alternative approach to the deteriorating situation in Xinjiang. Before it was shut down, Mr. Tohti’s Uighurbiz website was a forum for Han and Uighur contributors to discuss Xinjiang issues, bridging the two communities; the need for more interethnic communication was a theme when the Communist Party issued revised Xinjiang policy guidelines last May.
Most important, Mr. Tohti pointed out that China’s own existing laws could protect minority cultures — if only they were observed. He did not call for a radical American-style democratization, but rather for the protection of indigenous institutions — support for non-Han cultural expression, job opportunities and truly “autonomous” government administration — that is enshrined in the Chinese Constitution and a 1984 law.
This system of “ethnic autonomy” was indirectly derived from the pluralist (though not democratic) ideology of the Qing empire (1644-1911), which first brought Xinjiang, Tibet, Mongolia and Taiwan under Beijing’s rule as a “great family under Heaven.” Though superficially resembling the system of national republics undergirding the Soviet Union, the system developed by the People’s Republic of China differed in substantial ways and was adapted to Chinese conditions and outlooks. It functioned successfully in the 1950s, when Xinjiang was designated the “Xinjiang Uighur Autonomous Region,” and again in the early 1980s, and it remains popular with minority groups even though they have never been afforded real autonomy. Far from “inciting separatism,” Mr. Tohti was advocating a return to foundational promises dating to Mao’s era.
Management of diversity and pluralism is a pressing world issue, from Scotland to Ukraine to Ferguson, Mo. China has an opportunity to contribute its own fixes to the bugs in the nation-state model, but cannot do so by locking up its most creative and courageous thinkers.

Deflation:Oil Drop,China Affected Next, Need Canada Worry?

OPEC Presents QE4 and Deflation

Commodities / Crude OilNov 29, 2014 - 01:10 PM GMT
Thinking plummeting oil prices are good for the economy is a mistake. They instead, as I said only yesterday in The Price Of Oil Exposes The True State Of The Economy, point out how bad the global economy is doing. QE has been able to inflate stock prices way beyond anything remotely looking fundamental, but energy prices have now deflated instead of stocks. Something had to give at some point. Turns out, central banks weren’t able to inflate oil prices on top of everything else. Stocks and bonds are much easier to artificially inflate than commodities are.

The Fed and ECB and BOJ and PBoC may of course yet try to invest in oil, they’re easily crazy enough to try, but it will be too late even if they did. In that sense, one might argue that OPEC – or rather Saudi Arabia – has gifted us QE4, but the blessings of the ‘low oil price stimulus’ will of necessity be both mixed and short-lived. Because while the lower prices may free some money for consumers, not nearly all of the freed up ‘spending space’ will end up actually being spent. So in the end that’s a net loss as far as spending goes.
The ‘OPEC Q4′ may also keep some companies from going belly up for a while longer due to falling energy costs, but the flipside is many other companies will go bust because of the lower prices, first among them energy industry firms. Moreover, as we’re already seeing, those firms’ market values are certain to plummet. And, see yesterday’s essay linked above, many of eth really large investors, banks, equity funds et al are heavily invested in oil and gas and all that comes with it. And they are about to take some major hits as well. OPEC may have gifted us QE4, but it gave us another present at the same time: deflation in overdrive.
You can’t force people to spend, not if you’re a government, not if you’re a central bank. And if you try regardless, chances are you wind up scaring people into even less spending. That’s the perfect picture of Japan right there. There’s no such thing as central bank omnipotence, and this is where that shows maybe more than anywhere else. And if you can’t force people to spend, you can’t create growth either, so that myth is thrown out with the same bathwater in one fell swoop.
Some may say and think deflation is a good thing, but I say deflation kills economies and societies. Deflation is not about lower prices, it’s about lower spending. Which will down the line lead to lower prices, but then the damage has already been done, it’s just that nobody noticed, because everyone thinks inflation and deflation are about prices, and therefore looks exclusively at prices.
It’s like a parasite can live in your body for a long time before you show symptoms of being sick, but it’s very much there the whole time. A lower gas price may sound nice, but if you don’t understand why prices fall, you risk something like that monster from Alien popping up and out.
I had started writing this when I saw a few nicely fitting articles. First, at MarketWatch, they love the notion of the stimulus effects. They even think a ‘consumer-spending explosion’ is upon us. They’re not going to like what they see. That is, not when all the numbers have gone through their third revision in 6 months or so.
Welcome to the new era of QE4. As if on cue, OPEC stepped in just as monetary policy (at least the Fed’s) has dried up. Central bankers have nothing on the oil cartel that did just what everyone expected, but has still managed to crush oil prices. Protest away about the 1% getting richer and how prior QE hasn’t trickled down to those who really need it, but an oil cartel is coming to the rescue of America and others in the world right now.
It’s hard to imagine a “more wide-reaching and effective stimulus measure than to lower the cost of gas at the pump for everyone globally,” says Alpari U.K.’s Joshua Mahoney. “For this reason, we are effectively entering the era of QE4, with motorists able to allocate more of their money towards luxury items, while firms are now able to lower costs of production thus impacting the bottom line and raising profits.”
The impact of that could be “bigger than anything that has come before,” says Mahoney, who expects that theory to be tested and proved, via sales on Black Friday and the holiday season overall. In short, a consumer-spending explosion as we race to the malls on a full tank of cheap gas. Tossing in his own two cents in the wake of that OPEC decision, legendary investor Jim Rogers says it’s a “fundamental positive for anybody who uses oil, who uses energy.” Just not great if you’re from Canada, Russia or Australia, he says. Or if you’re the ECB, fretting about price deflation. Or until it starts crushing shale producers.
Bloomberg, talking about Europe, has a less cheery tone.
Eurozone inflation slowed in November to match a five-year low, prodding the European Central Bank toward expanding its unprecedented stimulus program. Consumer prices rose 0.3% from a year earlier, the EU statistics office said today. Unemployment held at 11.5% in October [..] While the slowdown is partly related to a drop in oil prices, President Mario Draghi, who may unveil more pessimistic forecasts after a meeting of policy makers on Dec. 4, says he wants to raise inflation “as fast as possible.” [..]
“The only crumb of comfort for the ECB – and it is not much – is that November’s renewed drop in inflation was entirely due to an increased year-on-year drop in energy prices,” said Howard Archer at IHS. The data are “worrying news” for the central bank, he said. Data yesterday showed Spanish consumer prices dropped 0.5% this month from a year ago, matching the fastest rate of deflation since 2009. In Germany, Europe’s largest economy, inflation slowed to the weakest since February 2010. [..]
Bundesbank President Jens Weidmann, a long-running opponent to buying government bonds, today highlighted the positive consequence of low oil prices. “There’s a stimulant effect coming from the energy prices – it’s like a mini stimulus package,” he said in Berlin.
Sure, there’s a stimulant effect. But that’s not the only effect. While I’m happy to see Weidmann apparently willing to fight Draghi and his pixies over ECB QE programs, I would think he understands what the other effect is. And if he does, he should be far more worried than he lets on.
But then I stumbled upon a long special report by Gavin Jones for Reuters on Italy, and he does provide intelligent info on that other effect of plunging oil prices. Deflation. As I said, it eats societies alive. I cut two-thirds of the article, but there’s still plenty left to catch the heart of the topic. For anyone who doesn’t understand what deflation really is, or how it works, I think that is an excellent crash course.
That same process plays out, as we speak, in a lot more countries, both in Europe and in many other parts of the world: South America, Southeast Asia etc.
Deflation erodes societies, and it guts entire economies like so much fish. Deflation is already a given in Japan, and in most of not all of southern Europe. Where countries might have saved themselves if only they weren’t part of the eurozone.
If Italy had the lira or some other currency, it could devalue it by 20% or so and have a fighting chance. As things stand now, the only option is to keep going down and hope that another country with the same currency Italy has, i.e. Germany, finds some way to boost its own growth. And even if Germany would, at some point in the far future, what part of that would trickle down to Italy? So what’s Renzi’s answer? An €80 a month tax cut for people who paid few taxes to begin with.

Deflation is not lower prices. Deflation is people not spending, then stores lowering their prices because nobody’s buying, then companies firing their employees, and then going broke. Rinse and repeat. Less spending leads to lower prices leads to more unemployment leads to less spending power. If that is not clear, don’t worry; you’ll see so much of it you own’t be able to miss it.
And don’t think the US is immune. Most of the Black Friday and Christmas sales will be plastic, i.e. more debt, and more debt means less future spending power. Unless you have a smoothly growing economy, but that’s not going to happen when Europe, Japan and soon China will be in deflation.
And yes, oil at $50-60-70 a barrel will accelerate the process. But it won’t be the main underlying cause. Deflation was baked into the cake from the moment that large scale debt deleveraging became inevitable, and you can take any moment between the Reagan administration, which first started raising debt levels, to 2008 for that. And all the combined central bank stimulus measures will mean a whole lot more debt deleveraging on top of what there already was.

We’ll get back to this topic. A lot.
By Raul Ilargi Meijer

Wabush woes: Labrador mining town reels from a China slowdown

The Wabush Mines stands in the distance behind homes in Wabush, Labrador. (FRED LUM/THE GLOBE AND MAIL)

Wabush woes: Labrador mining town reels from a China slowdown

Ron Barron has spent 30 years working in the Wabush mine, one of three generations of Barrons who have toiled in the open pits in what western Labrador bills as the iron ore capital of Canada.
The family’s roots run deep here. Mr. Barron’s father was one of Wabush‘s first settlers, who not only got a job in the mine when it opened in the 1960s but also helped organize a union. Five of Mr. Barron’s brothers have worked in the same pits along with his son and nephew.


But now Mr. Barron’s life has been upended along with the rest of city. The Wabush mine, once the cornerstone of this community, is shutting down along with another iron ore mine called Bloom Lake in neighbouring Quebec. More than 1,000 miners will be out of work, not to mention a slew of other job losses from businesses that service the industry. It’s a crippling blow in an area with a population of about 9,000.
“Oh my god, everybody loses. All the organizations, the schools, everything loses. Everything will suffer because of it,” said Mr. Barron, who will be officially out of a job by mid-December. “We have had shutdowns and layoffs before, but this is different. The mine is closing.”
The reason for the closings is simple: The price of iron ore, a key ingredient in steel, has been in freefall, falling 60 per cent in three years. Where the resource once traded as high as $190 (U.S.) a tonne in 2011, it is now below $70. The deterioration is due to two factors: less demand from China and an oversupply of iron ore and coking coal, which is also used to make steel.
As a result, producers around the world are slashing costs, halting operations and laying off workers in droves. What’s happening in Wabush is taking place in many other Canadian communities as well as resource-rich countries such as Australia.
The fall out can be seen in places like Sept-Îles, Que., where an iron ore pellet plant was shut down, and in Tumbler Ridge, B.C., where a number of nearby coking coal operations have been suspended and two mines closed. “When the commodity price goes down and mines close, it is devastating,” said Darwin Wren, Tumbler Ridge’s mayor. In Queensland, Australia, thousands of mining jobs have been lost as coking coal prices fall by more than 60 per cent since 2011.
But it is here in Wabush and Labrador City – known as Labrador West – where the real impact can be seen. These communities were built around two giant iron ore mines nestled in the surrounding snowy hills. It’s here where iron ore is so critical to everyday life that just about anyone can quote you the price of the mineral on any given day.
“Most of our residents follow the price. There is an understanding of how dependent we are,” said Labrador City’s mayor, Karen Oldford.
The rise and fall of iron ore
For a long time, iron ore wasn’t like most other minerals. It didn’t have wild price fluctuations because global steel production remained fairly constant. That changed in the early 2000s when China’s economy surged and the country gobbled up vast amounts of stainless steel to build everything from railways and power grids to office towers and apartments.
The increased demand sent iron ore prices soaring, up from $30 a tonne to $190 in seven years. Companies invested billions of dollars to boost production, existing mines expanded and employment levels took off. And most took on large amounts of debt to snap up mining assets, convinced China’s growth was unstoppable.
In Canada, the big attraction was a 1,600-kilometre-long iron ore-rich mineral belt called the Labrador Trough that straddles the Quebec and Labrador border. That deposit, and another in the Far North, made Canada a player in the global iron ore market. Soon, bidding wars broke out for Canadian mines. Cleveland-based Cliffs Natural Resources Inc. bought out its partners in the Wabush mine in 2010 for $88-million and then spent nearly $5-billion a year later for the Bloom Lake mine. The world’s largest iron ore producers – Rio Tinto, BHP Billiton, Vale SA and Fortescue Metals Group – spent billions expanding and building their mines.
But China’s double-digit growth didn’t last and when the country’s economy began to cool, steel demand fell along with the price of iron ore. At the same time, the iron ore giants kept pumping more iron ore into the market, eager to cash in on their more than $100-billion-plus investments. With their costs per tonne below $30, these heavyweights were, and still are, able to rake in huge profits. But over the past four years, they have added 300 million tonnes to an already saturated market, leaving higher-cost producers scrambling.
“Any recovery in prices will have to come from either a recovery in demand in China or from an acceleration in the closure rate of high-cost producers,” Paul Gait, an analyst with Sanford C. Bernstein in London, said in a recent research note.
The iron ore market has a surplus of about 70 million to 80 million tonnes this year, according to CRU Group, a global commodities research firm. Next year, CRU expects a surplus to narrow somewhat to 50 million to 60 million tonnes, but that’s still more than enough to meet global demand. Metallurgical coal, also used in the steel-making process, is suffering the same fate with a surplus of about six million to eight million tonnes.
Since the summer, the price of iron ore has slipped even further. A barrage of weak economic data from China showed a slowdown in its manufacturing and property market – two sectors that consume huge amounts of stainless steel. In addition, China’s steel exports nearly doubled since last year, underscoring the fact that the country simply needs less metal.
“There is just not a whole lot of demand growth,” said Jessica Fung, commodity strategist with BMO Nesbitt Burns. “The steel sector is relatively mature and China has gone through its double-digit growth.”
At first, companies took precautionary measures to deal with the downturn. Some like Baffinland Iron Mines Corp. scaled back its Mary River iron ore project in Nunavut while others made small cuts to production. Now companies are suspending operations and shutting down mines.
“It is inevitable that some will have to shut down. Who shuts down is the real question,” said Serafino Capoferri, a consultant with CRU Group.
Fort McMurray East
People in Wabush know the rise and fall of iron ore all too well.
This community was carved out of the bush 50 years ago, shortly after exploration of the area in the 1950s revealed a giant deposit. Soon the IOC mine was opened, then the Wabush mine opened in 1965.
Like many one-company towns, there have been highs and lows. But the emergence of China as an economic powerhouse triggered a wave of unprecedented expansion. The Bloom Lake mine opened in 2010. The IOC mine, now controlled by Rio Tinto Group, expanded. Wabush was set to crank out even more ore and another company, Alderon Iron Ore Corp., had plans to build a new mine. Exploration of the Trough continued with hopes of even more mining.
At one point, Labrador West came to be known as Fort McMurray East, taking a cue from the Alberta boom town. Local hotels were perpetually booked and grocery stores could barely keep their shelves stocked.
As workers and opportunity seekers flooded in, housing got scarce. Duplexes that cost $25,000 in 2000 were going for more than $500,000. Home rental rates jumped from $1,500 a month to $6,000. Even one room in a home cost $1,000 a month to rent and landlords routinely pushed out long-time tenants to make room for higher-paying contractors.
“When I moved here, I couldn’t buy a house or rent anything. My company put me up for six months. Then I bounced around to cabins and basements,” said John Skilling, who moved to the area from Nova Scotia during the boom years.
The community grew so fast, local officials travelled to Alberta to get tips from people in Fort McMurray on how to cope with rapid growth.
“It was crazy,” said Mr. Barron, who served as Wabush’s mayor during the boom time.
Mine closings
The boom time is over and the closing of the Wabush and Bloom Lake mines is hitting the community hard.
More than 400 residents lost their jobs when Cliffs suspended operations in Wabush last February. About 500 workers will go at Bloom Lake. Although some miners were able to find work at IOC, others had to look outside of Labrador West and head to the Alberta’s oil sands and the Muskrat Falls energy project in eastern Labrador. Many are still looking.
A third of the Wabush city operating budget comes from mine taxes. Those funds are used for basic city functions, such as shovelling the roads and hauling away the garbage.
“Things are very tough. Every day is a struggle. We want to get everyone back to work. We are looking for new opportunities,” said Wabush’s mayor Colin Vardy.
The once frantic housing market has softened with vacancy rates climbing. Landlords are cutting rent to entice tenants to stay and the average home price has dropped about 15 per cent since the boom times. A three-bedroom house that went for $450,000 in the heyday can now be bought for just under $400,000. But most aren’t selling, meaning prices are likely to fall farther. Residents talk about how families took on hefty mortgages to buy half-a-million-dollar homes and they will now be stuck with a property worth less than what is owed.
Along one quiet road in Wabush with a view of a lake and mountains, about 15 per cent of the houses had for sale signs on their lawn. They were new houses built during the boom years and some have been on the market for a year.
“A lot of people are holding on to wait and see,” said Lois Milley, a realtor with Sutton whose “For Sale” signs can be seen all over Labrador West. Ms. Milley said she hasn’t seen any foreclosures yet.
Residents are not fleeing as they did during the recession in the 1980s. But the future is uncertain.
In addition to the closing of the Wabush and Bloom Lake mines, Cliffs had already stopped production at its iron ore pellet plant on Quebec’s north shore earlier this year. Labrador Iron Mines Holdings Ltd. had to suspend all operations at its mine and development projects.
The fallout has spread across the area, with many local businesses, reliant on miners’ spending, laying off staff. Even the lineups outside a Tim Hortons drive-through are shorter and there’s no problem getting a table at the local Pizza Delight.
Mike Scott, who owns two mine-servicing businesses in Wabush, said the city has changed over the past six to seven months. “The phones are quieter, the shop is quieter, the town is quieter,” Mr. Scott said. “The attitude, I guess, is somewhat subdued, like people died or something. You know what I mean? The air is heavy.”
Mr. Scott used to own one store in New Brunswick, which provided repair services to mines. In 2010, business was so good he set up two industrial shops in Wabush. One of his workshops has a crane that can lift 100 tonnes to repair the giant shovels and equipment used to move the ore.
His business has changed for better and for worse. Contractors have left, freeing up some of the work for shops like his. At the same time, there are fewer mines to work on. “Not only did the mines invest. But a lot of people like ourselves invested. We put up a building looking at the future,” said Mr. Scott, who grew up in New Brunswick and commutes between the two provinces. “Now you have all these players, and we are one of them, still picking at the same plate. But the plate just got smaller.”
Cost problems
For companies that invested heavily in iron ore projects, the reality is grim. Labrador Iron Mines suspended operations at its small mine in the Trough when the mineral was trading at around $90 a tonne. Now the company is racing to secure additional funding to stay afloat.
“It is very difficult competition for all Canadian iron ore companies,” said Labrador Iron’s chief executive officer John Kearney. “Companies need much lower operating costs.”
Labrador Iron is trying to renegotiate contracts with its suppliers and restructure its operations to get costs below $70 a tonne.
The Wabush mine’s cash costs were $137 a tonne earlier in the year. Bloom Lake’s costs were $94 a tonne. Those mines made money when iron ore prices were above $150 tonne, but not any more with prices dropping to around $70.
Initially, the community pinned its hopes on the Wabush mine being sold and reopened under new owners. But a proposed deal fell apart in October and Cliffs is getting the mine ready to close.
Mr. Barron and others say the government should step in and provide some assistance. The province’s Minister of Natural Resources, Derrick Dalley, said his government was “prepared to work with any interested company to ensure a smooth and expedient transition back to production, provided that the company has a viable plan for the mine and is committed to operating within our regulatory framework.”
“We know this is a difficult time for the workers of the mine and their families, as well as residents in the Labrador West area,” he added.
Alderon Iron Ore Corp., which is trying to raise more than $1-billion for its iron ore project in the Trough, is considering buying the mine. But it is only interested in the infrastructure and the land and it would not resume iron ore production.
The company’s own iron ore deposit is close to the Wabush mine, IOC and Bloom Lake. If Alderon obtained the necessary funding to start construction, it would at least help provide some jobs to those who were laid off from the Wabush mine. Alderon has no operations at this time.
But with the price of iron ore steadily dropping, Alderon has had a hard time attracting investors. “It is undoubtedly difficult to raise funding in this climate,” said Tayfun Eldem, the company’s CEO.
Long-time residents of Labrador West remember the 1980s when the recession slashed demand for stainless steel products. IOC and the Wabush mine cut production and laid off about 2,000 workers. Hundreds of houses were abandoned.
“This is not something we haven’t seen before in Labrador West. We understand we live in a mining community and we are very much subject to the world markets,” said Labrador City’s mayor Ms. Oldford, whose husband, son and father-in-law worked at the mine.
“One of the biggest things we started to talk about, even before the downturn started to happen, was diversification … So that’s where we are focused now,” she said.
Labrador West has not exactly diversified since the 1980s. IOC, Wabush and Bloom Lake are still the area’s main employers. The other businesses exist largely to service the mining industry.
The future for Labrador West
Ms. Oldford still has big dreams and would like to turn the area into a manufacturing hub. The mayor and city councillors, all volunteers, have dusted off an old report from the 1970s that explored developing other industries.
In an interview, she mused about someone developing a steel plant or making ball bearings for mines or creating some kind of research centre. She recently hosted a Taiwanese delegation and pointed out that Taiwan has no natural resources and has to import everything it needs.
“We have access to rail, we have access to a port. We have an industrial power rate that is attractive. We have a highly skilled work force,” she said.
A round wooden plaque inscribed with the words “Iron Ore Capital” hangs in the mayor’s chamber. That slogan seems somewhat faded now with two mines closing and the industry on the ropes globally.
Many residents like Bob Garland would like to stay. He loves the land, the winters and blue skies. He moved to Labrador two years ago to work at H & H Enterprises Ltd., a local business that does work for the mining industry, including crushing rocks. He was a human resources manager and was inundated with résumés when the Wabush mine suspended operations this year. Now he too is looking for work.
“Will there be anything else for me in Labrador West? Will I have to go to another part of Labrador or go back to another part of Canada?” he said. “There will be some of us that stay to fight another day.”