Why do falling commodity prices drive innovation in the Mining Industry?
Commodity prices have fallen and mining companies have to deal now with shrinking margins and high costs.
After years of voracious demand from China, the market for mined commodities has moderated somewhat in recent months as China turned its focus away from building infrastructure and moved toward becoming a more consumer focused economy. The result has been relentless downward pricing pressure. Oil, coal, copper, gold and silver have all felt the pinch. Many commodities are close to multi year lows.
As a mining company for market traded commodities, your ability to influence market prices is limited. In order to improve margins in such an
environment the best option to improve the situation is to have to look at operating expenses.
That means turning your focus to controlling costs and increasing operational efficiency. Mining companies need to focus on ensuring that their entire supply chain is as efficient and lean as it can be, and keep transportation and logistics costs low. But the best way to keep costs low and margins high is be sure every aspect of your business is as effective and efficient as it can be.
One way to improve operational results is to increase the utilization of your equipment, but you
can only increase asset utilization so far before you hit a ceiling. The Federal Reserve reported that the mining industry was running at more than 88 percent of its capacity, an increase of nearly 10 percent in a year.
As companies approach the upper limits of their realistic capacity, efficiency becomes even more important. This is where technological innovation comes in. The ever improving set of internet capabilities have opened up many new areas where mining companies can find opportunities for efficiency – especially on the operational side of the business.
The Internet of Things (IoT) is such an enabler and provides innovative ways to increase productivity using data in new ways. For example this
includes connections to already existing sensors from equipment to high-speed analytical tools that allow you to perform predictive maintenance so you know when a truck will break down before it actually happens. In addition, innovations like autonomous vehicles and remote control centers are examples of using data and the internet in a new way.
Starting with the right foundation in place, such as SAP Enterprise Asset Management (EAT) solution, you can take it to the next level with reliability-centered maintenance and predictive maintenance solutions.
By monitoring quality or operating parameters, sensors can feed minute-by-minute data to SAP HANA for near real time predictive analytics. By predicting potential problems well before they occur, the company can schedule maintenance at a convenient time
and head off prolonged down time spent waiting for spare parts or qualified technicians to arrive.
Well-maintained equipment uses less energy because it operates more efficiently, so there may be an additional energy cost savings as well as a positive environmental impact from using EAM and predictive analytics to monitor equipment.
Mining companies that use innovative right technology to improve their competitive edge by reducing costs
and improving efficiency and utilization will have better luck weathering the
fall in prices.
Without shrinking margins, there would be less pressure to be innovative and use the latest technologies
to get a competitive edge.