Falling metal prices have led to job losses: It’s Boom and Bust Again in Montana Mining Town

LIVINGSTON – 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.

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 Guarnera. "We could exceed the high prices we saw in 2006 and 2007."

Diversifying economy

The fortunes of the Old West used to be tied heavily to this boom-and-bust cycle in mining. The economy of the region, however, has diversified dramatically in recent decades, attracting tourist dollars, high-tech jobs, and jet-setting consultants.

Indeed, Livingston now boasts multiple art galleries and coffee shops where the new class of mobile knowledge workers pitch their laptops.

This economic makeover might help insulate states like Montana from the latest mining downturn, argue some economists.

"Mining is a recent return in the last four to five years, but it was declining," says Larry Swanson, a regional economist at the O'Connor Center for the Rocky Mountain West at the University of Montana in Missoula. "That doesn't mean these mining [businesses] are unimportant, but they are not a big part of what's going on here."

That's a minority view among the businesses and local officials along this stretch of the I-90 corridor that passes from the mountains around Yellowstone, through Livingston, and east into the prairie.

"It's precarious when you have a tourism-related economy and your manufacturing positions begin to soften," says Ed Meece, city manager for Livingston. When the broader economy suffers, he points out, so does spending on consultants, art, and tourism – some of the newer livelihoods here. It's old-fashioned manufacturing that tends to be the more stable base, he adds.

Mining still more lucrative

In nearby Big Timber, business has fallen by 50 percent at the Timber Bar, a local watering hole.

Owner Joann Fuller says she thinks it's partly due to the loss of those mining wages – among the highest-paying in the region. The mine's recent expansion helped the small downtown thrive, leaving almost no vacancy among the restored brick-and-glass storefronts.

"There's plenty of work around here, you're just not going to make the money you made," says Fuller. "That big money [from mine work] turns a buck pretty fast in a town like this."

Staff at the Livingston Job Service Workforce Center, a group helping laid-off miners, concur that the "New West" jobs in tourism, services, and healthcare aren't always attractive to miners who have bills reflecting their relatively high pay with good benefits. The center was able to help place some people at a recent job fair, but there hasn't been a lot of hiring happening before the new year and given the problems in the broader economy.

Tyner, the laid-off miner and a father of three, has sent out résumés but got no interest. His family lives frugally in a modest home here, dwarfed by mountains called the Sleeping Giants.

Tyner says he plans to fall back on other skills he's developed such as trucking and in telecom to find different work. "Living in Montana has taught me one thing, and it's [that] you better not put all your eggs in one basket," he says.

But he doubts whether he can replace the approximately $62,000 he was making at the mine. Despite not having big debts, the situation still keeps him up at night.

"The last couple of nights I haven't been able to sleep more than a few hours," he says. "Your mind wanders."