Big miners hear call to implement 30-day payment terms
Gladstone Engineering Alliance (GEA) has welcomed today’s announcement by BHP and its largest coal business BMA, as well as last week’s announcement by global coal company Peabody who will now be both implementing 30-day payment terms for its regional supply chain.
BHP today announced a change to its procurement policies, extending preferred payment terms of 30 days to all Australian businesses in local areas.
That means more than 600 local businesses in Queensland will receive preferential payment terms from December 1. Global coal company Peabody changed their procurement policies, extending preferred payment terms of 30 days for local suppliers last Thursday, November 22.
GEA Acting CEO Julie Gelder said the announcement is good news for regionally-based businesses in the resources supply chain as many businesses are having issues covering extended payment terms leading to a number of firms to cut back on planned employment, reduce investment in more productive new plant and equipment, and defer investment in research and development.
“There has been strong concerns from the supply chain about the adverse impact of extended payment terms on businesses who may need to carry the cost of work-in-progress for several months before receiving revenue for their work,” Ms Gelder said.
“The ongoing viability of businesses has been threatened by extended payment terms especially if they are unable to secure finance for their operations to cover their regular and unavoidable outlays such as wages, superannuation, and taxation payments.”
BHP Billiton Mitsubishi Alliance (BMA) – the organisation’s largest coal business - has agreed to implement the new terms, and Asset President James Palmer said the decision was made following a period of engagement with suppliers, host communities, and industry bodies like the Gladstone Engineering Alliance.
“We’ve heard concerns about the impact of our standard global payment terms on local businesses, and recognise there is more we can do to support our local communities,” Mr Palmer said.
“We will extend our preferential terms further than the existing small and local businesses already captured.”
BHP/BMA 30 day payment terms will extend to businesses in the Rockhampton region for the first time, which has been re-zoned as ‘local’ as part of BHP’s review of its procurement practices.
Ms Gelder added Rio Tinto has been leading the way for some time now in reducing payment terms across Australia and now with BHP/BMA and Peabody reducing their payment terms the GEA believe industry has heard concerns from the local supply chain and in the months to come many more will follow.
Picture GEA_001: BHP BMA invests billions of dollars in Queensland mining projects and have just announced the implementation of 30-day payment terms for the regional supply chain.