By Vikas Kumar Keshri, Business Consultant, YASH Technologies
The mining industry is entering a new era with various fast-evolving challenges. Miners face rising costs while battling multiple environmental, yield, and compliance issues. According to McKinsey, the mining narrative is significantly more complex and nuanced.
“2021 was a record year, and 2022 has been another: in recent months, prices for many mined commodities have hit record levels. (On the other hand), demand for selected commodities is expected to increase with consumer spending growth by 2030.”
Emerging megatrends, including the energy shift that has propelled commodities prices upwards, have also provided an advantage for leading miners as they plan their strategies to tackle this decade of unprecedented challenges. Several of the world’s top miners expectedly had fantastic financial results for 2021. Add these gains to their strong performance in 2020, and you have a decade of victory amidst volatility.
Will these top revenue makers carry the momentum into the next decade? A recent PWC forecast suggests increasing revenue and rising costs will bring in margin pressure.
Global GDP growth forecasts are coming down due to high energy costs, supply chain disruptions, lockdowns in China, and waning consumer confidence. However, pent-up demand for cars and consumer products will likely materialize over time as and when existing constraints are resolved. Commodity prices were volatile during 2022; steel prices hit the lowest level in nearly two years. This caused industry-wide production cuts and led to a downward correction of raw material prices.
Challenges and Opportunities:
Rising costs, and let’s not discount- changing regulatory environment mean miners need to work hard to increase profitability. Under the new reality (read climate change), miners must do more than reduce their emissions. They need to focus on assessing their supply chain in detail. This would be supplanted by the need to move beyond focusing on short-term targets towards longer time horizons, including ESG.
The Way Forward:
As the industry adapts to market volatility, miners will be forced to dig deeper and invest more resources to deliver value and meet increased demand. We explore the opportunities ahead for the mining industry—for transformation through digitalization and its potential. Meeting their targets will require a balanced strategy that can minimize impacts. How can they achieve this?
Supply chain transformation
In the face of the recent disruption, Mining and metals companies are employing multiple steps to prepare for a more efficient and resilient supply chain. As organizations explore ways to withstand the changes in trade and ensure they’re managing their supply chains appropriately, we see many miners considering more sophisticated approaches than previous generations.
With the industry’s characteristically ubiquitous nature, it must build resilience in the entire value chain, from suppliers to customers.
Adopting digital capabilities can defend supply chains against future disruptions. Many leading miners are already doubling their investment in advanced technologies like blockchain, AI/ML, and intelligent automation to bring hyper-operational agility and touchless supply chains, among other capabilities.
Fundamental shifts to business and operating models
When a business or organization approaches a new point in its lifecycle and must adapt to a market or technological change, it must rethink its business model. The mining sector is no exception; as companies face more intense competition, greater scrutiny, and more significant environmental impacts, they seek better ways to make money while improving sustainability. To do so effectively, they need to predict their customers’ future needs first, then shape their operations to meet those needs ahead of time — not after.
Environmental, social, and governance
More and more investors are now fixated on ESG. Some issues that will be the core focus of investors in the mining sector are:
In a survey, nearly 58% of mining investors said they wanted increased focus on decarbonization, while more than 60% stated they would not invest in a mining corporation that fails to live up to its ESG goals. The mining industry is, therefore, in a bid to get more ESG-compliant practices and better reporting in place. They are increasingly turning to intelligence-led predictive technologies for ESG. By integrating and harmonizing the end-to-end IT landscape, miners get greater control of the entire mining lifecycle, gain enterprise visibility, and sustain long-term profitability.
Balancing Productivity and costs through innovation
In a fiercely competitive market, miners need cost-effective and sustainable solutions. Many companies are starting to tackle these issues through better utilization of their assets and better variability management. The use of digital twins, for instance, facilitates simulation and can enable effective coordination. It helps visualize the entire value chain, create value from data, and use modern UI and advanced visualizations to get the complete picture of what happens in a mine.
Digital innovation and Mining:
Mining is a highly capital-intensive industry that faces significant sustainability challenges, particularly as the world becomes more data-driven and interconnected. These challenges will threaten their status quo in the next decade. Mining and metals firms must accelerate innovation to maintain their positions.
In the coming years, innovative thinking will be crucial to retaining market share and maintaining customer value. ESG, climate change, license to operate and geopolitical ambiguity will offer both challenges and new opportunities for mining and metals leaders. AI, big data analytics, blockchain, and more, will help companies increase efficiency and empower them to meet the customer’s expectations in new ways.