5. Demand Implications for Mining and Metals Companies in a Sustainable World
Strong demand for metals and mineral resources in a sustainable world makes these materials critical to supporting the energy, social and urban needs of a larger, wealthier global population of 9 billion people. Per-capita demand is lower per person than it was in the early 21st century. Consumption is no longer perceived as an indicator of wealth; instead, the concerted focus is on consuming as little as possible while enjoying higher living standards. A “circular” and sharing economy has become engrained in the global culture. This section considers the market trends and implications of the circular economy for mining and metals companies in a sustainable world.
Investors in a sustainable world value and trade metals and mineral resources based on a shared understanding of and commitment to economic and social development. The mining and metals markets are more diverse. Exchanges in Latin America and Africa play a key role in the global economy. For all investors, the factors once considered externalities, such as environmental efficiency and social impact, are incorporated into the value of goods, creating a “true cost”. Life-cycle assessments are an integral component of determining value, and sustainably managed metals and mineral resources are considered premium investment opportunities.
It is impossible to predict future demand for specific materials; however, an overview can be provided of indicative trends for energy, buildings and transport in a sustainable world:
- Energy: The energy mix in a sustainable world is radically different than in the past. Critically, it is a more diversified blend of fuels. As a result, the materials needed to generate energy are very different. A greater portion of energy comes from renewable and alternative fuels. The demand for coal has therefore decreased but not disappeared, as clean technologies such as carbon capture and storage mean coal remains a fuel source. Renewable energy plays a key role in the energy mix in the sustainable world, with implications for metals and materials. Wind and solar technologies, for example, require significantly more steel than other energy sources. Greater use of hydrogen fuel cells and nuclear power means increased demand for metal catalysts such as zinc and platinum. Rare earth metals play a key role in clean technologies and are likely to experience significantly higher demand, though in much smaller volumes compared to core metals and commodities.
- Buildings: Buildings in a sustainable world require stronger, more flexible and lighter materials. This has provided good opportunities for the steel sector, for example, although it is also a threat, as more cost-effective substitutes such as composites are developed.
- Transport: The transportation sector continues to be demanding of the mining and metals sector in a sustainable world. However, the type of products and the associated raw material inputs required have changed. Steel for ships and cars, for example, is stronger and lighter. A complementary and competitive trend is the greater use of materials such as composites and aluminium, particularly in aviation and aerospace. Automobile demand per capita shrinks as an increasingly urban population relies on dependable, low-cost public transportation systems, or uses short-term automobile sharing schemes when necessary. Consumers have a preference for electric and fuel-efficient vehicles, creating steady demand for materials used in batteries including rare earth oxides, cobalt and lithium.
Such examples are far from exhaustive. The demand implications in a sustainable world will be different for each metal and material. While further research is required to anticipate and understand these trends, mining and metals companies will undoubtedly have significant opportunities.
Global markets in a sustainable world have transitioned to a circular economy to mitigate anticipated trends such as a growing middle class (an additional 2 billion middle-class consumers by 2030), commodity price volatility, growing waste volumes and environmental regulations. The circular economy refers to a move from linear business models, in which products are manufactured from raw materials and then discarded, to circular business models where products or parts are repaired, reused, returned and recycled. The opportunity is immense – it is estimated that a subset of the European Union’s manufacturing sector will have realized net material cost savings of up to US$ 630 billion annually through 2025, stimulating economic activity in product development, remanufacturing and refurbishment.5
Customers and suppliers expect mining and metals companies to align with the circular economy. Downstream players find that “closing the loop” on the supply chain through improved product design, extended asset life, reuse and recycling can deliver tangible commercial and environmental gains. Closed loop systems reduce the need for extraction and processing of new resources and, in response, mining and metals companies have adopted the following three trends:6
- Reduce: Limiting the use of virgin raw materials and more closely aligning supply with demand; improving efficiency of resource exploitation (yield rate) by mechanization, automation and optimization; enhancing the recovery rate of mineral processing and smelting; limiting pollutant emissions such as tailings, gangue and mine wastewater; developing applications for lower grade ore.
- Reuse: Extending the longevity of a resource, material, product or service by anticipating and planning for future applications; installing cyclic wastewater, waste and tailings systems, and improving mineral processing technology; maximizing the use of waste and by-products; collaborating with downstream players to design adaptable and easy-to-repair products; marking materials and alloys to aid identification at end-of-life and accelerate subsequent application.
- Recycle: Reducing waste by processing resources and metal products so that they become newly available resources; treating waste water before discharge; developing processing capabilities to accommodate higher rates of scrap.
The transition to a circular economy will reduce the environmental impact of products across their life cycles. To effectively operate within the circular economy in a sustainable world, mining and metals companies will need to address three key areas: develop a workforce with the right set of skills and capabilities; be more actively involved in scrap markets; and focus on customer and consumer relationships.
The mining and metals workforce in a circular economy requires new skills. Mining and metals companies are constantly looking for innovative means to reduce the impact of their operations, requiring new technology and business processes, and R&D skills that are in greater demand. They have in-house life-cycle assessment capabilities for collecting, managing and applying robust datasets to measure product performance against industry standards. The assessments and data help create trust and confidence in the quality of materials that design teams use in working with customers to effectively reduce, reuse and recycle materials. Perhaps the most important skill, however, is building and managing effective relationships with suppliers, customers and consumers across the product value chain; this serves to drive product innovation and identify opportunities for improved efficiency.
The scrap markets in a sustainable world are more comprehensive, and mining and metals companies are actively involved. With material reuse a priority, scrap is more valuable. The market is more viable for some materials and products than others, with steel, aluminium, copper and zinc being good candidates. Beyond scrap purchasers, companies operating advanced scrap collection and distribution systems accelerate the effectiveness of the circular economy. The industry has agreed on a set of quality standards and a tracing mechanism to minimize the need for expensive testing to verify material composition and quality before reuse.
Finally, customers and consumers in a sustainable world have higher expectations from mining and metals companies. In a circular economy, these companies are not as removed from consumers, and their customer relationships are critical to building value across the value chain. Through strong relationships, mining and metals companies are able to adapt their production processes to more closely meet customer demands and deploy the higher environmental and social standards that consumers expect.
The circular economy is a key element of a sustainable world. Mining and metals companies thus employ new skills, build new relationships and increase activity in scrap markets to help reduce, reuse and recycle materials.