Mining shows its mettle.
In the past two decades, everything that could go wrong to an industry did go wrong for metals and mining. Two oil crises in the 1970s brought the energy-gulping smelting and refining sector to its knees. New materials such as polymers, composites, and ceramics became practical substitutes for metals. Environmental concerns led governments to adopt stringent regulations aimed at reducing pollution from mining and refining. And the economy throughout the industrialized world shifted its weight from manufacturing to services seemingly overnight.
But metals and mining in North America may be on the slow road to a comeback, says Carmine Nappi, a professor of mineral economics at the University of Montreal. Producers have undergone the sometimes painful process of restructuring in order to survive.
With the latest economic down-turn, the metals industry has cut its costs to the bone, Nappi writes in Forum for Applied Research and Public Policy. "North American aluminum, copper, and zinc producers realized that long-term survival required them to lower prices to a level comparable to their competition," he says. "Without dramatic cuts in costs, the U.S. metals industry was doomed to failure."
The copper industry, for instance, cut the cost of producing a pound of copper from 90|cents~ to 50|cents~. This dramatic reduction was achieved by investing in new, more-efficient production technologies and by permanently closing high-cost facilities. "Today, fewer firms produce copper at fewer operations with fewer employees, but these firms turn a decent profit and are expected to remain profitable regardless of changes in the international marketplace," according to Nappi.
The industry then recognized that "demand was not a gift of God but a market it would have to compete for." Competitors include not just other nations with metals and minerals to sell, but the new materials as well, says Nappi. The North American metals industry thus has become more aggressive in developing innovative products, processes, and end uses, increasing their research and development budgets dramatically.
Finally, manufacturers have become more customer oriented. "Many producers now permanently dispatch representatives to their major customers," says Nappi. "These representatives are given responsibility to learn about a client's production problems and help devise solutions."
The metals and minerals industry may never reach the level of robust health it enjoyed in the early 1970s--when competition was weak, energy was cheap, and demand outpaced supply. But policy responses by governments and the manufacturers themselves "have slowed down and, in some cases, reversed the declining trends in U.S. and Canadian market share of Western production of aluminum, copper, lead, nickel, or zinc," Nappi concludes.
Source: "Metals Industry Seeks Economic Comeback" by Carmine Nappi, Forum for Applied Research and Public Policy (Fall 1993). The University of Tennessee, Energy, Environment, and Resources Center, 327 South Stadium Hall, Knoxville, Tennessee 37996. Telephone 615/974-4251; fax 615/974-1838.
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|Title Annotation:||World Trends & Forecasts: Business; North American mining industry|
|Article Type:||Industry Overview|
|Date:||Mar 1, 1994|
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