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It's boom and bust again in Montana mining town

Falling metal prices have led to job losses in mining communities across the West.

By Staff writer of The Christian Science Monitor / January 6, 2009

Old and new west: Livingston, Mont., has diversified in recent years with tourism and high-tech jobs. Still, a sudden spate of mining layoffs is hurting the local economy.

Melanie Stetson Freeman/Staff

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Livingston, Mont.

It was the kind of town where the men who built the West – the railroad workers, ranch hands, and miners – had started to fade, replaced by service workers and fly-fishing operators.

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Then, as metals prices began to climb five years ago, mining made a comeback to this little brick city on the Yellowstone River, contributing to the virtually full employment here and a sense of achieving a sustainable economy.

"One of the [shift workers] I worked with said once to me: 'Your grandchildren are going to be working in this mine,' " recalls Ben Tyner, until recently a worker at the nearby Stillwater Mine.

Instead, a precipitous decline in platinum and palladium prices in the past few months has caused the mine to lay off 320 workers.

This scenario is playing out in mining communities across the United States. Nationally, more than 3,000 miners have filed for unemployment insurance since September, according to the Bureau of Labor Statistics, as metal prices since autumn have fallen down a deep shaft.

Falling metal prices

Molybdenum plunged from over $30 a pound in October to around $12 today. Nickel fetches one-third the dollars it did in March, and platinum and palladium prices have dropped more than 60 percent.

The global economic crisis is part of the problem. The auto industry uses half the production of platinum and palladium, so Detroit's woes are rippling out to Montana communities such as Livingston and Big Timber. But the real culprit is the US dollar, mining experts say, and therein lies reason for hope that mining here might yet revive.

The drop in demand for metals accounts for no more than 10 percent of the fall in metal prices, says Bernard Guarnera, president of Behre Dolbear, a minerals industry advisory firm in Denver. "Seventy to 75 percent [of the problem] is the strength of the US dollar."

A strong dollar makes it expensive for the Chinese and other foreign buyers to purchase US metals.

The dollar surged as it often does in times of global economic uncertainty, but there's no guarantee it will remain strong, especially as federal deficit spending expands. Margin calls have also forced companies to liquidate hard assets like metals, creating a supply spike that also could prove temporary.

If the current slowdown of mining production is indeed divorced from letup in demand, recovery might not be too distant.

"Down the road you are going to see a very major supply crunch where demand will far exceed supply. That will put tremendous pressure on the prices and you are likely to see in the next two to three years prices go up," says Mr. Guarnera. "We could exceed the high prices we saw in 2006 and 2007."

Diversifying economy