After a turbulent year for commodities, 2023 is set to be a transformative and pivotal year for the sector; with geopolitical uncertainty, supply chain disruption, and increasing momentum towards the green transition driving the need for change. This is against a dismal economic backdrop; with soaring inflation leading to higher commodity prices, as well as higher operating costs and capital expenditures. Challenges and opportunities will see some countries, mining players, projects and initiatives thrive, while others may languish.
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Environmental, social, and governance (ESG) will continue to feature prominently and grow in complexity for the industry as stakeholder expectations increase. As more mining companies take active steps to respond to and address ESG-related issues, while avoiding greenwashing allegations, the ‘how’ will be as important as ‘what’ they are developing and implementing. The demand for quantifiable results will only intensify as stricter regulations come into force.
The geopolitical tensions and resource nationalism we saw in 2022 will still play an influential role in mining demand and supply. Security threats and conflicts are rising as the economic outlook worsens. Miners will need to develop a deeper understanding of the impact geopolitics and regional threats will have on strategy, personnel and operations, in order to manage, minimise, and prevent risks.
Resource nationalism will only set to deepen, especially in the battery metals and minerals market, as we push towards a green transition and a low-carbon economy. As countries try to recoup pandemic debt, rises in taxes and royalties, together with changes in mining policies and ownership agreements, will mean tensions between companies and governments are more likely. The line between resource nationalism and legitimate national interest is not always easy to draw, and with several countries going to elections this year – including key resource rich African countries such as Nigeria, Mauritania, Zimbabwe, and Democratic Republic of Congo – politicians may start positioning themselves to secure greater benefits from natural resource wealth to improve livelihoods and placate voters.
The pace, trends, and demand vs price of critical raw metals and minerals needed to accelerate the global energy transition will remain top of mind in 2023 for explorers and producers, as they assess the opportunities and risks and get in front of the energy transition agenda. Finding and mining the required metals and minerals is getting harder and more expensive. There will be a heightened sense of international competition to secure resources which, in turn, may fuel protectionist rhetoric.
As demand for critical minerals grows, factors such as disrupted supply chains, high geographical concentration of production, long project lead times, and growing scrutiny of environmental and social performance will come into play. Slowing electric vehicle production has recently been one of the affected industries, tempering demand for battery metals nickel, cobalt and lithium, despite the global push for electrification of the mobility sector. China’s zero COVID-19 policy may result in further disruptions to PEV-related battery metal supply chains, which will affect global markets. The IEA estimates that soaring EV battery demand will require 50 new lithium projects, 60 nickel mines, and 17 cobalt developments by 2030.1 Unfortunately, current investment is nowhere near the scale required, signalling there will be more roadblocks ahead.
Finally, like all industries, talent attraction and retention will be a growing challenge. For the mining sector, the problem is particularly acute given the older workforce trend. Mining companies will need to adapt their workforce attraction, retention and development strategies, and ensure they reflect the changing needs and expectations of today’s workforce to succeed in the war for talent.
Tough times indeed, but set to be transformational for the industry.
- DEMPSEY, H., and CAMPBELL, P., ‘Carmakers switch to direct deals with miners to power electric vehicles’, Financial Times, (15 November 2022), www.ft.com/content/a8e0f1bb-f69a-4a77-b762-02f957e47f5c