There are three main components of the mining supply chain: exploration, mining and processing. Along this chain, from mine to market, a range of different countries, companies and jurisdictions must play a role.
One of the results is a highly variable supply chain, which is harder hit by price fluctuations, geopolitical crises and natural disasters. Therefore, it has always been more difficult for mining companies to have a complete end-to-end integrated process management system.
Covid-19 has laid bare the vulnerabilities of this system as demand for raw materials such as copper, iron ore and zinc has fallen dramatically. As a result, mining companies have had to reassess the resilience of their organization and their global supply chain models.
The copper industry is one of the most explicit examples of this fragmented supply chain. Copper has a very narrow supply base, with 65% of documented copper resources in just five countries: Chile, Australia, Peru, Mexico and the United States.
The narrowness of the supply base is also reflected in copper processing. China is the largest importer and exporter of refined copper and residence to 9 of the 20 largest copper smelters in the world. With such a narrow supply and processing base, if one major supplier is disrupted, the whole chain suffers. This was the case in 2021 when numerous community strikes led to the shutdown of operations at the Las Bambas mine in Peru for several months.
With copper becoming increasingly essential to support the upscaling of green energy, several solutions exist to address its fragmented supply chain.
First, mining companies could move towards a customer-centric supply chain, using data and technology to facilitate a more efficient and profitable way of operating. They should also support recycling and reuse projects to ease pressure on the supply chain, expanding the metal’s supply base.
The mining supply chain
Mining supply chains are very complex and represent all mining assets, including equipment, processing plants, and rail and port operations. The wide range of processes required to bring copper from mine to market and the distinct interrelated steps within each activity before products reach consumers further complicate matters.
Currently, the mining supply chain operates within organizational silos, business divisions that operate independently and avoid sharing information. This means that the supply chain has limited coordination and data exchange, making it very fragmented and not part of an integrated process.
As a result, the supply chain is subject to disruptions due to economic, political and natural forces. The stakes have risen dramatically in recent years as geopolitical uncertainty and shifting demand for critical minerals have led to more and more targeting of key deposits in more challenging jurisdictions.
Extraction
Nowhere is this more apparent than when examining the copper supply chain. Copper is very abundant and occurs in the free metallic state in nature. However, it has a very patchy distribution, requiring certain geological conditions. This uneven distribution has led to a minimal supply base, with only a small number of producing countries. Peru, for example, accounts for 40% of mined copper, which means that if one large producer suffers, the whole supply chain suffers.
However, within these major producers, ore grades are steadily declining. When Analyzingcopper mines, the average ore grade has fallen by about 25% in just 10 years. During the same period, total energy consumption increased at a faster rate than production (a 46% increase in energy compared to a 30% increase in production).
From 1991 to 2015, global mining doubled from 9.3 million tonnes to 18.7 million tonnes, raising fears about the future availability of copper, with several studies estimating that the global peak in copper production will occur between the ages of eight and 40.
Falling grades, a very tight supply base and shrinking salvageable assets pose significant risks to the copper supply chain, compounded by labor negotiations and blockages. There is now a projected shortage of copper supply relative to demand until 2025, with the deficit reaching up to 290,000 tonnes.
Treatment
After extraction, copper must go through a long process to be viable for industrial and commercial use. Copper processing encompasses a range of steps including unit processes for sizing, separation and mineral processing such as grinding, sizing, separation, dehydration and hydrometallurgical or chemical treatment.
However, like its mining base, copper processing has a limited scope and the Covid-19 pandemic exposed the weaknesses of this system when major smelters began to question whether they could maintain production, which which drove copper prices to an all-time high. Subsequently, China’s imports of copper concentrate fell 1.9% year-on-year to 21.76 million tonnes in 2020, the first drop in imports since 2011.
These supply constraints are at odds with increasing demand for copper, driven in large part by the green energy transition, including the accelerating growth of electric vehicles and charging systems in the automotive industry. Demand for “green copper” is only expected to grow over the next 10 years, with estimates that demand growth could increase by up to 13% year-on-year.
Boost the supply chain
A range of solutions exist to ease the pressure on the supply chain. First, stakeholders can explore the deployment of data-driven analytics and artificial intelligence, allowing companies to identify customers who represent the greatest revenue potential at the lowest cost and prioritize service. of these targets. This will reflect shorter cycle times, more on-time deliveries, and a reduced need to speed up.
Developing a circular supply chain is also a viable option. Since primary copper supply is determined by mine production and smelter and refining capacity, increasing copper refined from high-grade scrap and secondary refining capacity could provide a secondary stream of copper in the market.
Moving away from the traditional, linear “make, use, throw away” economy towards the circular economy would require reuse, refurbishment, recycling and increased efficiency of materials.
However, since copper is a 100% recyclable metal, with 80% of mined copper still being used, the supply of recyclable copper is only expected to increase. Countries like Japan and China have made excellent progress in creating a circular copper supply chain. However, this progress seems localized and it will become necessary to improve the quality of communication processes, to seek new standard solutions.
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