Demand for mined metals is expected to continue rising. New investment through 2022 looks likely, although the rate of market growth could slow slightly this year. Phil Hastings reports.
This year the mining industry’s global budget for exploration relating to non-ferrous metals (those which do not contain any appreciable amounts of iron) is likely to be 5-15 percent up on the 2021 aggregate of just over USD11 billion, according to S&P Global Market Intelligence. The 2021 total was in turn 35 percent up on the 2020 figure of USD8.3 billion.
The analyst commented in its 2022 Metals and Mining Outlook report: “While we anticipate that metals prices will slip somewhat in 2022 from their current highs, medium-term supply constraints are setting the stage for historically above-average prices through to 2025 − driven mostly by increasing demand for materials used in the accelerating global energy transition.”
Supply chain issues
Less positively, the supply chain issues being felt across many industries are also at play in the mining equipment sector. The latest quarterly Surface Mining Equipment Index published by the Parker Bay Company, for the third quarter of 2021, stated that “Q3 shipments somewhat surprisingly declined marginally [by just over 2 percent] versus Q2” and that “the explanation of the moderating shipments activity may at least partially lie with global supply chain problems that have affected virtually all sectors of the global economy”.
The war in Ukraine and subsequent sanction of Russia will certainly affect mined commodity flows. Russia is one of the world’s largest exporters of raw materials – its share of total global nickel exports is estimated at around 49 percent, palladium stands at 42 percent, and diamonds at 33 percent. Aluminium, platinum, steel and copper stand at 26 percent, 13 percent, 7 percent and 4 percent, respectively. This will need to be replaced by alternative sources – which will surely create an appetite internationally to develop or expand facilities – and prices are fluctuating in the interim.
Overall, though, project logistics providers servicing the mining sector are generally optimistic about business prospects for the next couple of years.
From the heavy lift side, a typical assessment was delivered by Andrew Civil, head of commercial for UK-based ALS. “In line with market expectations, we hope to see a further increase in activity through 2022/2023 and more opportunities for ALS to bid for the provision of logistics relating to the shipment of plant and equipment.”
Frank Mueller, general manager of Singapore-headquartered global multipurpose operator AAL Shipping, made similar comments. “As 2022 progresses, elevated commodity prices will continue to drive the interest of producers in increasing their production by improving current operations and pursuing the exploration of new mines,” he said.
That is the case in South Africa, for example, according to Kolosa Mbuyane, regional sales manager for Sarens Siba, which provides equipment for mine development projects in the country. “The current slow market now seems to be gaining momentum, with several expansion and upgrade projects on the table in the short to medium term. A few examples of ones we are looking after are a new concentrator plant in the Steelpoort area, a mine expansion in the Rustenburg area, and a mine and plant upgrade in Rustenburg,” she stated.
Project forwarders are likewise generally optimistic and for similar reasons, as summarised by Xavier Lariau, global operations expert for mining at Ceva Logistics.“Commodity prices remain elevated, and we anticipate they will hold steady in the near term. As a result, mining projects will continue to advance in order to meet demand for those commodities. So, our outlook is positive,” he commented.
Brad Stephens, director of Afriguide Logistics, a South Africa-based freight and project cargo company with a strong background in mine modernisation and expansion projects, added: “Current mined commodity prices are highly supportive of upgrade and expansion projects, so we anticipate that short to medium-term investment − and therefore mining-related cargo movements − will continue until the demand for minerals abates,” he said.
Even so, there are significant regional variations worldwide when it comes to the current state of the mining projects market and associated logistics challenges, said Gavin Erasmus, global sector head of mining for DHL Industrial Projects.
“There are a number of gold projects being planned in West Africa, all of which offer unique logistics challenges because of the infrastructure available in the region. East Africa is also a growth area if the political situation can stabilise, with projects in Tanzania, Ethiopia and Eritrea being advanced in the short term,” he reported.
“South America is going through an election phase currently and a number of big projects have been put on hold. Those should progress once the political situation has settled and governments can come to terms with the requirements for environmental licences. With significant offshore sourcing for those projects, the challenge in the next 12-24 months will be managing the logistics costs in a very volatile ocean freight market.
“Canada, Australia and the USA, where the situation is more stable and infrastructure more developed, will continue to be a source of significant projects although the logistics requirements for those will lean more to local sourcing and road freight project cargo. Those markets will continue to be very competitive, with low margins in project logistics.”
Meanwhile, in Brazil, mining sector logistics business is set to get a boost from current national government moves to encourage greater private sector investment in rail, road and port infrastructure to help reduce transportation costs.
That was the view of José Luis Vidal, chairman of Brazilian international project forwarder WV Logistics & Services. “Under a new regulatory framework for the railway sector published in December 2021, the Brazilian government is opening up the possibility for the private sector to build new sections of railway at their own expense and risk,” he explained.
In that context, he continued, 21 contracts have already been signed by 12 companies relating to the building/operation of new railways, currently totalling over 6,800 km of lines and supporting freight terminals, using their own resources.
“That investment will open up additional possibilities for other industrial investment in Brazil, including the development of mining assets, which until now did not have technical or financial viability, either because of a lack of transport infrastructure or because of the existing transport costs,” stated Vidal.
The resulting potential increased movement of mining industry and other project cargo volumes over the next few years, he claimed, will make Brazil even more attractive market for global freight forwarders. “Some of those have already approached WV Logistics about the possibility of this company becoming an exclusive partner for them in Brazil,” he added.
FOX Brasil provided further evidence of the current strength and future potential of Brazil’s mining industry and prospects for the project logistics market for the years ahead. The São Paulo-headquartered forwarder recently opened a branch office in Belém, capital of Pará state in north Brazil.
“We are working on increasing our market share in Brazil’s mining sector and Pará is the largest iron ore producing/ exporting state in Brazil, with major mines controlled by Vale,” explained Murilo Caldana, FOX Brasil’s project director.
Pará is also a growing centre for nickel mining operations, notably an estimated USD500 million-plus ferronickel project, Araguaia, being developed by Horizonte Minerals which is expected to produce more than 14,500 tonnes a year eventually.
Beyond the short term immediate impacts, mining industry observers generally go along with S&P’s suggestion that much of that sector’s future development worldwide will be driven by “increasing demand for materials used in the accelerating global energy transition”. McKinsey & Company, for instance, stated in an article published earlier this year that the world’s transition to a net-zero economy will be metal-intensive.
“Requirements for additional supply will come not only from relatively large-volume raw materials − for example, copper for electrification and nickel for battery electric vehicles (EV), which are expected to see significant demand growth beyond their current applications − but also from relatively niche commodities such as lithium and cobalt for batteries, tellurium for solar panels, and neodymium for the permanent magnets used both in wind power generation and EVs.”
Those probable trends are already influencing the longer-term business plans of many of the companies providing project logistics services for the mining industry.
“Long term, alongside the general exploration and development of new mines to replace depleted locations, the demand for commodities to support the global paradigm shift to green energy will boost the creation of new business opportunities,” said AAL’s Mueller.
Afriguide’s Stephens painted a similar picture. “We are expecting continuing demand for logistics services relating to new and existing mines, particularly in the copper, cobalt, nickel, aluminium and lithium sectors which are slated to grow significantly in the next five years. That is where our focus will be in terms of marketing and route development.”
As far as overall prospects are concerned, most observers believe a combination of continuing growing global demand both for metals specifically required to help generate cleaner power and more basic industrial commodities is set to drive further substantial expansion.
New mine demand
“With increased global demand [for commodities] and a number of current mines reaching their ‘end of life’, it can be expected that development of new mines and cost-effective upgrades will take place at an increased tempo,” agreed Sarens Siba’s Mbuyane.
The war in Ukraine, meanwhile, will affect global commodity supplies. Russia’s sanction and isolation from international markets means a shortfall that must be met by other means.
Much of that development will be in new geographical areas, and in areas that are often remote, creating new opportunities and new logistics challenges for the industry.
This article has been taken from HLPFI’s March/April 2022 edition. Read the full mining report here.