Unprecedented, challenging and disruptive – these are just some of the words that have repeatedly been used to describe the times since early 2020. So how does 2022 measure up to the past two years and what are the year’s key trends for the mining industry? Here are our key predictions for 2022.
The industry will continue to bounce back
Like the rest of the world, the mining industry saw its operations disrupted by the onset of the pandemic. But unlike many other industries, the resource sector was able to find its feet and turn things around relatively quickly. In fact, the recovery started as early as the second half of 2020. For 2022, we predict that the industry will continue to recover from the challenges and disruptions caused by the pandemic and to actually thrive. With metal prices still above pre-pandemic levels, the majority of industry stakeholders will see their financial results improve.
There are several reasons for this upward trend. For one, there is still plenty of pent-up demand for commodities and consumer goods on a global scale. Governmental stimulus programs will also play a key role in the industry’s continued recovery. It will also be very interesting to see how the rapid shift to low carbon energy sources will drive the mining industry’s growth in the coming year. Which brings us to…
Green energy will drive demand
To meet the 1.5°C Paris Agreement goal, governments and industries alike are shifting gears, aiming to cut down on their scope 3 greenhouse gas emissions. This means stakeholders across the board will be investing in low carbon energy sources and green technology. This will also drive up demand for key minerals.
In 2022, we predict that mining companies will continue to invest more heavily in projects related to minerals necessary for low carbon technologies, such as copper, lithium, nickel and cobalt. All in all, the global low carbon transition is set to play a key role in the resource industry’s ongoing recovery and growth.
Leveraging on sustainability and transparency
There is also another way in which the low carbon transition will impact the mining industry in the year ahead. As the climate crisis continues to evolve, there will be increasing pressure for the mining industry to renew its own practices. This means mining companies will need to find ways to reduce their own carbon emissions and overall impact on the environment.
Moving forward, stakeholders will also need to focus on communicating their sustainable practices and values in order to attract investors. Promoting sustainable practices will become an increasingly important competitive advantage. A global 2020 survey by BCG found that the pandemic had increased people’s environmental awareness. A whopping 87% of respondents agreed that companies should exercise greater concern for the environment in regards to their products, services and operations. More specific to the mining industry, a 2018 study titled Broad overview reputation of mining and exploration concluded that in order to be viewed positively, mining companies need to focus their communication on how they are reducing environmental impacts, among other key issues. This is why we predict that sustainability and transparency will be one of the key trends for the mining industry in 2022.
The impact of resource nationalism
The increasing demand for copper, lithium and other minerals essential for low carbon technologies means governments are also tightening their grip on these raw materials. This will lead into increased resource nationalism which will add yet another dimension to the challenges and opportunities the mining industry will face in 2022. Resource nationalism will also be driven by the economic impact of the pandemic which has sent governments scrambling to make up for the financial losses caused by the crisis.
There have already been signs of mineral-rich countries exerting their control over raw materials by restricting exports. 2020 saw resource nationalism rise dramatically, according to data from Verisk Maplecroft. This has been an ongoing trend since 2017 and Verisk Maplecroft expects it to extend through to 2023. The trend has been particularly prominent in Latin America, though there are examples across regions. Indonesia, for example, has restricted its coal exports, which has had a significant impacted on South Korea. This means that across the board, mining companies will need to be able to adapt to rapidly changing government regulations and restrictions.
Technology and innovation
While the mining industry will continue to bounce back in 2022, there is no denying the uncertainty the pandemic continues to leave in its wake. The crisis has brought into sharp focus how important it is for the mining industry to be able to adapt and to reinvent itself.
Rather than exploring new assets, we expect more and more companies to invest in digital solutions to gain control over their current operations. This will be disruptive to the industry at large. For one, new technological innovations will help underdeveloped markets better compete with more developed regions which can impact industry dynamics. Digital innovations will also play a key role in driving transparency across operations which, as we’ve already established, will be crucial moving ahead.
But even more importantly, the contrast between companies that use new digital innovations – from frontline work management solutions to robotics and beyond – to their advantage and those that fail to adapt will become even more stark in 2022. It will be interesting to see how many companies will take advantage of the productivity gains enabled by software solutions without spending any capital – something we continue to see with our own clients. Resource sector operations use our software to rapidly and sustainably lift their performance by more than 10%. With a recent Fitch Solutions report indicating that in 2022, mining companies will continue to focus on dept reduction, we expect this proposition to become even more attractive to industry players in the year ahead.