Economic models have usually been based on the laws of supply and demand for centuries. But both have undergone substantial changes since the start of COVID-19, particularly in the mining and metals sectors. What is going on? Then why?
2019 saw a surge in demand for most goods, including commodities. Then, when the epidemic struck the United States in early 2020, we saw a sharp decline in demand and a shortage of essential commodities. Demand increased once more when vaccines became available in the first half of 2021, but supply chain and engineered solutions remained limited. In the latter part of 2021, we observe another fluctuation in demand for basic materials like copper and iron ore.
Demand projections for 2025 by metal:
Let’s first examine the forces at work in the mining and metals sectors. They have a great effect on the supply chain and engineered solutions.
Iron ore prices are expected to be highly volatile in the short future (the next six months) and over a more extended period until 2025. The price was $200/tonne in the middle of 2021, but it anticipates to drop to $172/tonne on average by the end of the year. To $95/tonne by 2025. This price drop results from China’s decarbonization effort slowing down, which has limited steel production and dampened Chinese demand for iron ore.
On the other hand, copper presents a pretty different picture. Floods in China, labor disputes in Chile, and mine blockades in Peru pose supply issues for copper. Prices increased by 47% between 2020 and 2021 due to these events. Further out, it will anticipate that there would be a deficit in copper supply compared to demand until 2025, with the deficit potentially reaching 290K tonnes.
Like copper, nickel is a critical component of the electric vehicle (E.V.E.V.) sector, particularly for batteries. The demand is anticipated to expand from an estimated 100K tonnes in 2021 to around 450K tonnes in 2025, nearly five times this amount. Along with the E.V.E.V. industry, Indonesia’s enhanced stainless steel output, which has raised exports by 120% yearly, is also likely to lead to higher demand.
Cobalt and lithium
Over the next few years, lithium and cobalt will also impact heavily as the move to green energy and electric vehicles proceeds. That’s because cobalt improves battery stability and safety, and lithium requires for lithium-ion batteries.
The demand for lithium chemicals anticipates increasing from over 340K tonnes in 2020 to over 1M tonnes by 2025. The demand in the E.V.E.V. industry is a significant driver of this expansion. Although there are supply issues as well, it anticipates that this would result in a 140 percent increase in lithium prices from 2020 to a projected price of $12K/ton by 2025.
Impacts on the Mining & Metals Supply Chain and Engineered Solutions:
Copper & lithium raw materials are in short supply chain and engineered solutions, driving up prices, and threats of mine strike in major producing countries only worsen matters. Human resource constraints are also an issue: Western Australia’s iron ore miners are dealing with a severe shortage of train drivers, while the U.S. lacks maximum truck drivers. As the cost of freight shipped by trucks increases, the number of drivers continues to decrease.
By 2023, there may be a shortfall of roughly 240,000 drivers, up from the current level of about 48,000 in the U.SU.S. In addition, shipping costs are increasing due to vessel delays brought on by congestion in Chinese ports.
For mining and metals industries, the constantly changing dynamic that negatively influences supply chains to represent by the combination of significant fluctuations in demand, ongoing supply restrictions, and accompanying price volatility. Companies will require to be able to scale up quickly when demand and prices are more significant and then scale down quickly to reduce costs when demand and prices are lower when demand and commodity prices fluctuate. To maximize profits at the lowest possible cost, businesses must have this agility level.
Change to a customer-centric supply chain and engineered solutions is what we recommend:
We have defined six building blocks to help mine and metals companies become more customer-centric and respond to current and upcoming demand or supply issues. They need these blocks as a perfect supply chain and engineered solutions.
A living division
Due to unpredictable demand and supply issues, mining and metals industries can no longer expect to fulfill every potential customer. Instead, businesses ought to consider finer-grained client segmentation. For instance, businesses can identify which end consumers have the highest revenue potential for the lowest cost and prioritize those targets by employing data-driven analytics and artificial intelligence (A.I.A.I.).
Additionally, technology may assist mining and metals businesses to become more agile, increase operational effectiveness, and offer real-time decision support. For instance, it can automate supply chain operations to cut costs and the possibility of human error, which could result in delays. This is possible thanks to technologies like robotic process automation (R.P.A.) and A.IA.I. Moving workloads and data to the cloud gives you more freedom to adjust computing resources according to changing market conditions.
Supply chain and engineered solutions that focuses on services
Owning business choices and profit and loss at the site or plant level limits sight and the capacity to act cohesion on more extensive regional or global dynamics, despite being typical at many mining and metals corporations. Companies can make more strategic decisions that influence the organization as a whole—for instance, around transportation or distribution—by centralizing P&L and specific supply chain responsibilities.
Greater visibility across your entire enterprise, from raw material and supplier inventories to customer orders, production status, transportation (inbound, outbound, and inter-company), and supply chain logistics, can be achieved by building a digital “control tower” using the cloud, Internet of Things (IoT), and A.I.A.I. technologies. An imminent scenario, such as port congestion, equipment failure, a lack of inventory, or a problem with human resources, can be detected by a control tower and addressed.
Application of data and intelligence
Mining and metals industries are digitizing more and more, which is generating enormous amounts of data. One copper mine today can produce more than 500GB of data every minute. Advanced analytics, including A.I.A.I. and machine learning, is required to extract value from this data at scale.
Continuous innovation is crucial as businesses adjust to the constantly shifting market conditions. The mining and metals sectors struggle with difficulties related to production efficiency, safety, and carbon footprints. To spur future innovation, you can solve these problems by utilizing cutting-edge technologies like cloud, A.I.A.I., IoT, and blockchain.
Prismecs is one of the best platforms for supply chain and engineered solutions. Let’s check out the site to get the complete information about services. Further, you can contact us on this number; 18887747632. We also promote your queries at our official email address: email@example.com. Our experts are ever ready to serve you with up to dates and latest information on prevailing market trends about supply chain and engineered solutions.