Metals and Mining Industry
After a decade, mining and metals industry is back in focus primarily due to rapid rise in demand due to economic thrust from emerging economies and lack of investments in the last decade in developing and exploring mines resulting in limited supply. Prices of metals are on an uphill path giving profits to mining companies in the short term. The demand supply gap is attracting huge investments to boost supply through increasing exploration and M&A activities. For the long term, commensurate rise in supply side will help in sustaining growth seen in emerging economies and the steady demand maintained in developed world.
Key trends shaping the Industry:
Growth in exploration and asset acquisition: Emerging economies are leading the growth momentum and Governments are supporting it by importing basic minerals and metals in huge quantities. Keeping in mind that there have been limited exploring activities before, huge investments are going in capital equipment and mining assets by major companies to bridge the gap in demand and supply and ensure sustainable growth for coming years.
Irregular Demand: The demand cycle in emerging economies due to their dependence on a lot of external factors follows a cyclic path. This would require mining companies to remain flexible in terms of mining activities. To keeping operating costs low, companies will be tempted to shut down operations which may later cause loss of further revenues when demand picks up. Hence, keeping costs flexible will be the key to growth so as to maintain level of operations even during low demand conditions.
Challenges facing the players involved in the industry:
Flexibility of production level:Companies are building resources in wake of increased demand level. But keeping operating costs low is a big challenge so that production levels can be easily controlled when demand growth subsides. This requires control in the exploration and capital equipment building activities with equal flexibility on utility expenses. Those companies will increase their chances of sustainable growth who keep their operating costs linear with rising asset base.
Grow organically vs follow M&A path:Rise in demand has put mining companies in dilemma to consider short term demand through M&A or build resources organically keeping long term in perspective. Keeping in mind the long periods before the new assets become productive, careful consideration of capabilities and assessment of markets served is needed to follow the right path.
Increasing responsiveness: As the origin of demand shifts from developed nations to developing nations the uncertain nature of demand will stay in future. Companies are facing challenge in building capabilities that can increase their responsiveness to fluctuations in demand without hurting their bottom lines. Better information flow and immediate actions will be the key to developing capability to cater demand from emerging economies.
How can BMGI help?
BMGI has achieved in-depth understanding of mining and metals industry working closely with companies ranging from exploration to distribution of metals. BMGI’s expertise in operational efficiency has delivered substantial savings to many companies in the last decade. With the current demand rise, BMGI is positioned favorably by extensive access to knowledge of emerging markets and its operational optimization capabilities to provide flexible solutions to companies.
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