A statement released by Australian mining unions described the pandemic as the ‘most significant disruption to daily life since the Second World War’. One doesn’t need to look far to see the reality of this claim, with borders closing and businesses grinding to a halt – the knock-on effects trickle down to reach every facet of home and industry life.
Considering mining’s reliance on global supply chains, transient workers and efficient transportation, it is no surprise manufacturers are increasingly questioning whether operations will fall prey to disruptions. Although everyone breathed a collective sigh of relief when the major producer that is China came back online, the impacts of operation closures during the country’s peak of pandemic is, as of yet, unknown. While nobody is able to say for certain how long the situation will last or what its long-term impacts will be, it is evident that no industry will come out of this entirely unchanged.
The ripples of change
Speaking with investment bank VTB Capital’s head of metals and mining research Dmitry Glushakov, he says operations around the world are already beginning to feel the squeeze from the virus.
“Over the past week, we saw the Philippines province of Surigao Del Norte (which accounts for a third of the country’s nickel ore exports) shutting mining and processing,” he says. “Mexico declared a national lockdown on April third, effectively ordering the shutting of all mining and processing operations, and adding to silver and copper disruptions. Zimbabwe has also entered into lockdown, albeit while allowing Zimplats to continue operating at an unknown scale.”
Meanwhile, quarantine measures in Chile and Peru are still impacting copper supply, with some 18% of global capacity effectively shut. Similarly, the Cobre mine in Panama has been closed due to 11 of its workers testing positive for coronavirus. The mine accounts for 1.2% of the global copper market and, adding to the outages in Peru and Chile, this means 25% of the global copper supply has been closed down.
According to Glushakov, it is the Platinum Group Metals (PGM) industry that is currently being hit the hardest in terms of closures.
“The PGM industry faces the highest rate of capacity shutdowns,” he says, “with 42% of platinum mining capacity shut and 20% of palladium.”
Looking at these figures, it may seem like the situation is bleak. However, the robust nature of the mining sector must not be under-estimated: an industry that boasts strong crisis management, global operations have not lost all hope.
Stronger than it seems?
“There are various things going on here, but underneath it all, mining is ultimately a supply chain business,” he says. “It’s driven by engineers and metallurgists, and these guys are very plan-driven. They’re used to contingency, they’re accustomed to thinking about risk-related things. This is exactly what we’re in the midst of now.”
With an arsenal of spare parts, Alexander argues the industry is also well-placed to deal with things from a maintenance point of view, though he acknowledges such a position is time-sensitive.
“I don’t think the industry will be in a position where they’ll have to stop producing, though of course there’s a limit to all of this,” he adds. “I could imagine three months wouldn’t be a problem, though six months down the line it may well be a different story.”
With China coming back online, and operations from other countries having the option of moving production to less-affected areas, Alexander also says manufacturing could survive relatively unscathed for now. The biggest problem, he says, lies further down the line – when customer demand and markets will be changed following the pandemic’s end. The fact that we don’t yet know what this new demand will look like is, he says, the biggest worry.
“Customer demand is being completely rewritten,” he says. “People aren’t sure what they’ll need in the next 6-12 months. We don’t know what’s going to happen as the world comes back online, some supply chains are going to be completely changed. We won’t be able to go back to things just the way they were.”
Safety in the meantime
In terms of the immediate response to the crisis at hand, it seems to be a balancing act between keeping workers safe and ensuring an industry that props up so many economies doesn’t completely grind to a halt.
“Labour is proving challenging at this time,” says Alexander. “A lot of places are shutting borders and so there’s a big push to move fly-in fly-out workers into hotels so they can continue to work. That’s going to prove a massive disruption to home life. It will get everybody through, but it will be difficult.”
In places like Australia, where the resources sector employs more than a million nationals, and makes up more than 58% of the country’s export income, ensuring workers can continue their business safely is an imperative.
“Families, communities and small businesses across regional Australia and in our major cities depend on the mining industry,” says Tania Constable, Chief Executive Officer at the Minerals Council Australia (MCA).
Saying this, the full impact of the crisis is, as of yet, unclear, and as the MCA’s joint statement says: “The measures currently being undertaken to attempt to control the spread of the pandemic are unprecedented, and no aspect of Australian social life or the economy will remain unaffected.”
Indeed, while the industry is managing the situation as best it can, the unprecedented nature of the crisis is proving difficult to wrangle. While the industry is well-placed to deal with crises, everyone is in the same boat of having to take each day as it comes, and ride the wave.