Mining, Metals and Minerals Industry Overview

Though mining companies have taken substantial steps towards strategic sourcing, centralizing supply functions, and standardizing and rationalizing equipment, procurement processes in several organizations still seem to be outdated. With a large number of ad-hoc purchases breaching procurement rules and instances of duplicate payments for the same items, the industry faces several challenges that highlight the need to develop robust procurement market intelligence strategies. With an in-depth analysis of client requirements, SpendEdge provides detailed information on how to effectively source a given procurement category and identifies opportunities for development.

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The distinct sub-segments of the energy ecosystem will go through critical changes and disruptions in the short term because of the deepening coronavirus impact. SpendEdge presents a quick dashboard that summarizes the impact on the energy industry so far and what to expect in the global energy ecosystem for the next 2-3 months.

Mining, Metals and Minerals Impact Analysis: Key Insights

• The unprecedented spike in infections across the globe has led to a global shutdown, causing massive cutbacks in production in multiple industries.
• Demand for minerals and metals has gone down considerably as buyers still hold unused inventories.
• Suppliers of minerals and metals are facing an acute shortage of personnel across the supply chain due to shutdown measures. This has led to major production disruptions for suppliers.

The next few weeks are crucial for the demand curve as the coronavirus impact on the materials industry becomes more evident. The exponential rise in COVID-19 cases could result in serious supply bottlenecks.

On a more positive note:

• Governments will soon start taking initiatives to revive their economies with increased public health measures in place.
• Roadblocks for suppliers will be reduced and demand outlook will improve intermittently.
• Buyers around the world will be closely monitoring the situation to find favorable opportunities for materials procurement.

Mining, Metals and Minerals Demand-Supply Trends

The materials industry has seen a spike in demand for metals used as raw materials in critical healthcare equipment such as ventilators. This spike has been observed across the world but most noticeably in COVID-19 hotbeds such as the USA, Italy, and Spain along with countries with poor medical infrastructure such as India that are building up contingency preparedness.

To address the coronavirus impact on the materials industry, stakeholders have taken concrete steps to scale down production due to the anticipated reduction in demand from multiple sectors such as the commercial and construction industries. Also, for production of materials such as steel, manufacturers require a few months to restart critical steel-making equipment. Consequently, supply bottlenecks will occur once demand for materials picks up across the globe after the COVID-19 crisis has been brought under control.

Risk Mitigation Activities to Address the Coronavirus Impact on the Materials Industry

Uncertainties loom large and the industry will swing between extremes as the coronavirus impact makes its presence felt in the global economy. Executives around the world are examining their supply chains with a microscope to find risk elements. Companies that can proactively identify or anticipate the bottlenecks in their supply chains will be closer to finding solutions for supply chain risk mitigation.

These solutions will have to be extremely customized for the sector, location and government responses and it is impossible to develop a “one-size-fits-all” solution. Still, there are elements which are common to any resilient risk mitigation plan. We recommend a few of these below for immediate results.

Avoid Spot Market Buying

Buyers should avoid spot market procurement because most suppliers are committed to prioritizing contracted buyers due to the demand shortage. Procurement from contracted preferred suppliers will ensure supply continuity and could also provide rate discounting benefits from suppliers sitting on excess inventory despite the worsening coronavirus impact on supply chains.

Alternative Suppliers

Develop relationship with vendors from countries that have a lower count of COVID-related cases or are still working in a relatively normal environment. However, buyers must also be aware of increased prices in these geographical regions due to increases in demand for materials from such locations.

Holistic Risk Mitigation Plan

It is not enough to only look at production centers: material buyers must evaluate logistics-related risks associated with the delivery of material and develop a procurement strategy accordingly.

Local Sourcing Strategy

For buyer organizations, it can be beneficial to create a localized procurement strategy to minimize any transportation related bottlenecks that are caused due to the coronavirus impact. Such a step is recommended in order to minimize the risks involved with the global lockdown scenario.

Round-the-Clock Monitoring

Buyers need to be up to date on global developments as well as country-specific trends. The lockdown situation can change suddenly in locations that are of importance from a supply chain perspective. Buyers also need to monitor emerging success case studies and learn from them.

Revisiting Contract Terms

Global commodity and energy prices are expected to behave in a very volatile manner for some time. Companies that spend significantly on commodities and energy items as key inputs need to re-engage their suppliers and explore mechanisms to safeguard against increases in pricing. It is advisable to fix the short-term procurement price or at least keep a maximum limit on upward price movements.

Ensuring Shipment Visibility

Supply chain disruptions have created logjams at cargo hubs and warehouse facilities. It is expected that shipments will remain stuck at various places for an unknown duration and massive delays will occur in the entire supply chain. It is imperative that software solutions being used for supply chain management, inventory, warehousing, shipment tracking etc. are updated regularly. Complete visibility and accurate communication in the supply chain are important for drawing alternative plans and minimizing the loss of shipments in transit.