Metals and mining cover a range of industries and have a strong focus in the construction, transport, automotive and logistics industry. These commodities may not always make headlines, with oil taking up most of the attention as it impacts consumers directly but these commodities impact us indirectly in many ways.
Over the last few years we have seen the price of oil plummet in a big way due to several market, industry, climatic and political reasons. At the same time, this had an impact on other commodities, including metals, which have seen a lot of volatility. More currently, metals have been less volatile this past year.
What is a key signal of this growth? Most of the largest mining companies reported positive revenues. Economic growth in different parts of the world has contributed to this. One key market is China, which saw increased demand for copper, pushing the price up to $3 per pound, according to Reuters.
This has benefited the copper mining industry in Chile, where the aggregate copper exports reached around $3.18 billion, its’ central bank reporting this the highest level in the past 3 years.
Observing growth in the US and Europe, an increase in economic activity has been positive for the metals and mining sector. According to Ernst & Young, growth in both these markets exceeded 2% and is anticipated to continue in 2018, this is a positive signal for the metals and mining sector.
What can these companies do to continue this growth? In order to sustain business growth, they will need to ensure adequate operational technology to keep up with globalisation and global demands. New systems will need to be adopted to streamline processes and manage supply chains.
Going forward, everyone will be keeping an eye on continued growth in emerging markets, including China and India. If these economies show strength and continue to invest in infrastructure and other development projects, this could boost the overall demand for metals and mining commodities.
As trade relations are shaped by political bodies, this will have an impact on this sector. With the US President pulling out of multilateral trade agreements and with the UK vote on Brexit last year, these events will create a very different trading climate and shape global value supply chains . Some key decision points for companies in this space would include:
- How and where to focus on M&A towards developing new markets, customers and even suppliers ?
- How to manage costs even better in the overall production, supply chain and customer management process ?
- Can debottlenecking be a viable option for the long term and can we boldly take the decision to shut down plants which no longer provide us cost effective margins as compared to offshore locations ?
- Do we still continue with our legacy systems for the core manufacturing process or adopt to modern seamless ERP and technology, can we take the risk?
- How do we create more sustainable and environment friendly sourcing, power, manufacturing and waste management development while still maintaining profitability?
- Can we move away from commodity selling to a more specialized market such as the automotive industry where aluminium is becoming a very popular product ? It is not just a commodity but customized product engineering effort that makes up for creating a differentiated market place.
Trade policies advocated in the US and the UK, although not yet finalised, will have a global impact over the next few years. It will be an interesting few years from 2018-2021 and a lot of policies that these two countries implement could determine the course this industry takes in the future.
Sources
About the Author: Adi G is an industry veteran with several years of experience in dealing with Energy, Utility and Resources industry clients and likes to present his views on topics that impact not just the industry but our communities and society in general. He can be reached @ady@luxconsultingservices.com
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