Today commodities are moving back broadly into the global market balance but the challenges for the mining industry are far from over. In a world of more complex ore bodies, deeper mines, social and geopolitical risks, growing energy costs, resource nationalism and lack of infrastructure, global mining industry remains under exceptional pressure to control costs, boost efficiency and improve safety performance.
Rising cost is a cause of concern for the mining industry as the strategies of mining companies depend heavily on the current state of the market. Also, the rise in cost is resulting in the declining quality of ore and limited accessibility of new deposits. This will squeeze the supply in the years to come, potentially driving a commodity-price rebound as the global demand continues to rise. So, the companies need to analyze the new procurement trends in the mining industry that can offer exceptional opportunities for efficiency gains and can help in controlling costs as well.
At SpendEdge, we understand the impact that rapidly changing procurement trends can have on your mining business. And to help companies in the global mining industry to reposition their portfolios and excel in the competitive landscape, our team of experts has highlighted three procurement trends that have the potential to change the complete dynamics of the mining industry in 2019.
Earth moving equipment is typically a heavy-duty vehicle which is designed for operating in construction sites that involve earthworks. Earth moving equipment is used to dig foundations for buildings or move a large amount of surface layer and so on. Earth moving equipment can include equipment like heavy machines, heavy trucks, construction equipment, heavy vehicles, engineering equipment, and heavy hydraulics – and there are lots of world famous earthmoving companies known for the quality of their equipment. Today, earth moving equipment faces the highest demand from the construction industry all over the world, followed by the mining industry. The demand for earth moving equipment during the forecast period is primarily driven by the growth in public infrastructure construction activity in the developing regions like APAC, MEA, and South America. Furthermore, the increase in investments in public infrastructure building will fuel the demand for earth moving equipment in these regions in the years to come. This would result in the impressive growth of the earthmoving companies over the next four years. (Source: Global Earthmoving Equipment Category Procurement Intelligence market Report)
Earth Moving Equipment
Mining companies have spent several years ruthlessly reducing costs. On the bright side, this relentless focus is gradually translating into enterprise-level productivity improvements, with virtually all of the significant players targeting billions of dollars in cost savings. The past few years have put tremendous strain on the industry. Demands for efficiency have skyrocketed, while the means to invest in new programs to support such efficiency have often fallen away with prices. New technology trends in the mining industry, in the form of mining software and innovations in water resilience, are offering exceptional opportunities for efficiency gains and are worth investigating for adaptation across the sector. Apart from this, there are several procurement trends that the mining industry has been witnessing in the recent years. Here is a quick look through some of them:
Increased process automation
In the constant push for cost efficiencies and higher productivity players in the mining industry are re-examining processes and how they manage every aspect of their operation. They are also focusing on procurement trends, which include striving for greater visibility to gain an in-depth understanding of how they work and their workflow processes, in particular with contractors. The automation of procurement processes, which is considered as a significant cost saver due to its ability to overhaul the traditional way of managing supplier contracts and operations, is a more efficient way to improve governance, visibility, and control over contracts in real time.
Rising cost-cutting measures
Maximizing savings through procurement has always been of great importance in the mining industry, and this is one of the procurement trends still prevailing in the sector. As it continues to come out of a downturn, many companies in the industry are looking for new and more effective ways to shed costs further to improve operational efficiency in an unstable market. Furthermore, finding new ways to enhance savings through procurement contracts can be challenging in a climate, which leaves many mining companies without the necessary budget to invest in new technologies or resources needed to meet KPIs. Hence, it is advisable for companies in this sector to tap into the expertise within the existing business to improve results.
Supplier relationship management
The change in the economy and ongoing uncertainty around the future of resource prices has caused many companies in the mining industry to look at existing supplier relationships and contracts and reconsider if they are the best option in the current market environment. Also, the cost is not the primary factor influencing companies to seek new suppliers. Companies in this sector are increasingly considering factors such as quality of the products or service as a critical factor. This indicates that, while many suppliers in the mining industry are trying to differentiate themselves currently only based on cost, it is clearly not the determining factor for most and other qualities are considered more critical to business.
To know more about the procurement trends and innovations in the mining industry
The past one decade has been a rollercoaster ride for companies in the mining industry. The commodity prices have reached both historic highs and lows, as well as operational realities shifted irrevocably in the face of the digital revolution. Mining companies better fasten their seat belts because those rapid changes are likely to continue and even accelerate this year as well. In addition, the industry’s commitment to strengthen balance sheet performance, reduce debt, and simplify portfolios, has resulted in record free cash flow, improved valuation metrics, and stronger shareholder returns. In many respects, the mining industry is once again poised for growth. As the mining industry’s value proposition is constantly called into question, mining companies have started to see that they cannot succeed in the future unless they change the way they operate. This goes beyond just enhancing efficiencies. It’s about re-establishing trust with stakeholders and collaborating to devise better responses. Here are some hindrances in the industry that mining companies can expect in 2018:
Data-driven insights to drive value
Once measured by how efficiently a company extracted resources, the value proposition in the mining industry may be shifting to how well mining companies act on information to optimize production, reduce costs, increase efficiency, and improve safety. It is becoming evident that success for mining companies doesn’t only depend on adopting the latest applications (apps) and technologies. Instead, it is also significantly dependent on embedding digital thinking into the heart of the company’s business strategy and practices to revamp the way corporate decisions are made. To succeed in this effort, mining companies need a clear vision of how the future digital mine might transform core mining processes, the flow of information, and supporting back-office operations. Hence, to deliver on the digital mine nerve center, mining companies need to develop the ability to use available data to resolve a wide range of business problems.
Changing customer, employee, and public perception
Mining companies operate under a legacy of weak environmental practices, fractious community relations, stock price underperformance relative to other sectors, and a historical lack of workforce diversity. Also, the public perception remains that mining companies contribute to environmental damage, cause a negative impact on the community, and engage in dubious practices abroad. Therefore, tarnishing the mining industry’s image. Also, negative perceptions can do more than damage reputations and affect stock prices. This mandates mining companies to take proactive steps to address and change their reputations.
Meeting shareholder expectations
As shareholder expectations grow, mining companies have started focusing on re-establishing their credibility among investors and analysts. Responding to rising shareholder expectations requires mining companies to walk a fine line. Although, it is vital for players in the mining industry to avoid decisions that can result in an erosion of value, shifting corporate direction to meet shareholder demand for short-term returns can result negatively in the long run. Mining companies can only win back investor confidence if they continually demonstrate the ability to deliver on their promises. This requires companies to improve their project management, forecasting, and reporting capabilities. Rather than prioritizing shareholder returns over all other corporate objectives, it may be helpful for mining companies to shift to a model that recognizes the breadth of functions they serve in the society. This includes activities ranging from generating shareholder wealth to providing employment, paying taxes, and contributing to local communities around the world.
Water management is one of the critical challenges that mining companies face. With each passing year, water has become a more crucial issue for the mining industry. The decline in ore grades results in the requirement of more water to extract the same amount of ore. The demand for water is also soaring globally due to population growth, industrial development, expansion of irrigated agriculture, and increases in per capita water consumption. So, it’s time for miners to improve their water management by rethinking their production processes and partnering with technology companies to incorporate and implement real-time water monitoring solutions.
To know more about the roadblocks that mining companies need to overcome
The mining industry plays a significant role in building the world’s economy. Several key markets such as utilities, the primary metals industry, non-metallic minerals industry (glass, cement, lime), and the construction industry are highly dependent on the mining sector companies. However, mining companies are the victim of some major challenges like diminishing productivity, harsh climates, remote sites, rising energy costs, and water scarcity to name a few. Despite these challenges, the fact that the industry ended on a strong note in 2017 is raising hopes for mining companies to showcase increasing health in 2018. So, who are the top players spearheading the mining industry’s journey to growth? Here is our pick of the top five mining companies in the world:
Rio Tinto PLC
Rio Tinto PLC is an Australian-British multinational company and is one of the world’s largest metals and mining companies. They have widely adopted the latest technologies in the mining industry and are investing heavily in new mining methods that will allow them to mine deeper, longer and at a lower cost than any other large mining firm. The London-based company operates through five product groups – diamonds, minerals aluminium, copper, energy and iron ore.
Glencore is one of the most diversified natural resources and mining companies in the world. The company is based in Switzerland. Their operations consist of about 150 mining and metallurgical, oil production and agricultural assets. Glencore’s industrial and marketing activities operate in a global network of more than 90 offices located in over 50 countries. Top players in the automotive, steel, power generation, oil and food processing sectors are some of Glencore’s top customers.
Anglo Amercian is one of the leading global mining companies that is based in Johannesburg and London. It is engaged in the exploration and mining of precious base metals and ferrous metals. Their portfolio of mining businesses includes bulk commodities, including iron ore and manganese, metallurgical coal and thermal coal copper, nickel, niobium and phosphates, base metals and minerals and precious metals and minerals The company is a significant player in the mining tech revolution. They have predicted that in the next decade, some mines will be run entirely without a human presence.
Vale is a Brazilian multinational metal and mining firm. The company owns the title of the largest producer of iron ore and nickel in the world. They also produce manganese ore, ferroalloys, metallurgical and thermal coal, platinum group metals, gold, silver, copper and cobalt. Vale operates across 30 countries and employs over 76,000 people.
Barrick Gold is one of the largest gold mining companies in the world. The company also mines and explores silver, copper and nickel. American regions including Argentina, Canada, Dominican Republic, Peru and the US are some of the major contributors of the company’s gold production. Their operations are also spread across regions such as Australia, Chile, Papua New Guinea, Saudi Arabia and Zambia.