The Future of Mining: The Next Great Super Cycle

There are more than enough opportunities for the industry to not only survive, but to thrive like never before. I have seen first-hand the effects of the super cycle in the early 2000s, as well as the many challenges brought on by the financial crisis. Now as the industry endures COVID-19, I can foresee the next great mining super cycle on the horizon.

First it is important to take a closer look at the short-term. Certain commodities like gold, copper and iron have maintained a high demand, driven by an undaunted Asian market. The prices of iron and copper ore in particular have remained high and stable thanks to their uses in infrastructure and goods manufacturing. While these commodities have held their ground, some have seen a dramatic fall from grace.

The prime example here is coal, having taken a considerable market hit. While profitable coal mines remain active, the future of this unsustainable commodity is looking dim. This is due to the widespread arrival of new climate change policies across the sector and beyond, with the mining investment community viewing climate change as central to their ESG policies. Because of this, we can expect western support for coal operations in particular to diminish in the future, but with China and India consuming 63 per cent of the world’s coal, the commodity’s overall decline may be slower than some expect.

Now that we have reviewed the status of some key commodity trends in the short-term, we can set the scene for the next mining super cycle. The widespread arrival of the COVID-19 vaccine will ease short-term industry disruption, turning the industry’s attention to the two key drivers of future demand; the green energy transition and the growing population. These factors combined will bring about an unprecedented need for metals. Whether it is lithium for electric car batteries or copper for wind turbines, the rise of green economies is a huge demand driver in and of itself. Battery vehicles require four times the copper of conventional combustion vehicles, a demand increase that Vale predicts will grow the automotive industry’s share of copper from four per cent to 38 per cent by 2030. This demand will call for new ore to be mined, and copper is not alone in its predicted growth. The demand for cobalt, lithium and nickel is predicted to rise as well, at rates of nine, fourteen and six per cent respectively.

To this equation we can add the surging global population, currently standing at 7.8 billion with the UN predicting a peak of 11 billion people by 2100. The majority of this growth is set to happen in Africa and Asia, parts of the world that are less widely developed today but accelerating. What this means is billions more affluent consumers demanding metals.

Adding another sense of scale to this growth, the average Westerner consumes around 10kg of metal per year. This is followed closely by the average Chinese citizen at 9kg, with the average Indian citizen much further behind at 0.5kg. China and India’s populations combine to form 30 per cent of the global population, with neither nation even close to the peaks of their infrastructure programs. When looking at these statistics and reflecting on the global population growth predictions, the future demand for metals is set to be staggering.

Although it is clear that the mining industry can expect favourable tail winds in the future, organisations cannot afford to get comfortable and ignore the many challenges they face.

Chief among these challenges is the need to optimise operations to produce more with less, if organisations hope to meet the demands of the future. Whether it means looking at new technologies or business model adjustments, companies need to ensure that their approach is sustainable and equipped to thrive.