The supply of strategic metals markets

To analyze the strategic metals markets, it is essential to understand the constraints of the mining productive system. This section details some general principles, but each with different metal chains and production constraints, accurate and individual analysis should be conducted to incorporate these specificities.

bubbleDid you know ?

The minor metals are rarely the main product of a field, they are usually co-products or by-products of a reporting chain of a major metal. Some are even by-products of by-products. For example, hafnium is a byproduct of zirconium (zircon), itself a byproduct of operation of titaniferous sand ilmenite. (Source: BRGM). More than half of the sixty metal we use are found and linked to the fate of other mineral substances.
 

warningA study by John Baffes, a 10% increase of energy prices translates mechanically by an increase of 2 to 3% of the price of major metals, and 4-5% for precious metals.

From the mine to the finished product, the production system is under increasing constraints.

Time Mining

Mining projects are by nature lengthy and expensive to implement. In order of magnitude, a project launched today will not allow the market to supply semi-finished products for at least 10-15 years. Provided, further, that the project will lead to the discovery of an economically exploitable deposit, which is not always the case.

Operating costs on the rise

Mining companies know more of operating costs rising, reflecting in particular the growing geological difficulties to access the ore, and inflation of input costs (labor), in particular that of energy. We must continually extract more rock, more deeply, to produce a given amount of metal.

raw-materials-prices-barrel-petrol

In the history of mining production, man has always favored the most accessible deposits, also the best veins have they already been exploited. The exploited deposits no longer have the same qualities as those of the past, especially their metal concentration levels.

Labor also account for a significant part of the increase in operating costs. Companies in a competition increasingly intense recruiting the right skills, must agree to substantial wage for skilled profiles, especially as exploitation is often in areas with low population density. In these regions, it is not uncommon for employees of the mining sector, earn five to ten times the national average.

New environmental constraints

The mining industry faces a growing political and societal pressure to limit its environmental impact. These new requirements have economic implications for farmers who need to invest in cleaner equipment or perform taxes linked their environmental performance.

informationIn some areas, the mining sector is particularly affected by water shortages, particularly in South Africa and Chile. According to the firm Trucost studies, 32% of copper mines and 39% of iron mines are located in regions with serious water shortages.

The deposits are exhausted…

Such as oil, metals are non-renewable resources. The deposits that we operate is a finite stock and expected to be depleted in the more or less long term. For various strategic metals, experts agree on the next passage of a production peak, similar to Peak Oil in the oil sector. Some reserves are estimated at several tens of years of consumption at most.

ore-concentration

 

Sometimes the production is very concentrated

The minor metals generally have supply chains concentrated in the hands of a few producers, sometimes in countries strongly unstable situation. Industrial users are therefore facing producers in a situation of quasi-monopoly, so with a strong bargaining power and the ability to direct market prices.

These distributional inequalities can create geopolitical tensions and strong economic instability, as was the case during the recent tensions in the rare earths.

production-of-critical-raw-minerals-materials

Recent decades have, for minor metals such as for major metals saw the meteoric rise of Chinese mining companies, deployed as part of a closely controlled by the state industrialization policy. If, in 1986, it was the largest producer of “only” 5 mineral raw materials, it is today more than 20 of them. This concentration of production does not mean that each of these resources is particularly concentrated in this country. For example, China now produces 86% of tungsten and 97% of the rare earths, though it has only about 60% of world reserves of these metals.