Meet technological, marketing challenges head on, U.S. mining

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Changes in production and use patterns around the world are causing profound changes in the U.S. mining industry which, by consolidating its efforts, should rid itself of obsolete plants and concentrate only on world-class facilities, says a vice-president for technology assessment of a Boston-based management-consulting firm.

Dr J. C. Agarwal, in a series of lectures sponsored by the Metallurgical Society and the Society of Mining Engineers, said a major reason the American minerals and metals industry is facing serious economic challenges today is that the industry has always been driven by the economics and quality of mineral resources themselves.

As more desirable resources are discovered elsewhere in the world, he said, the U.S. share of mining is declining. The technological challenge for producers is to lower costs and improve capital efficiency, he said; the marketing challenge is to develop proprietary products and to select the right market niches.

He stressed that the U.S. mineral resources base must be able to compete in the world market. When the economics favor exploitation of non-U.S. based resources, gradually U.S. producers will be forced to adjust domestic production.

Using the copper industry as an example, he said U.S. producers have to contend with ore that averages only 0.6% copper, whereas foreign producers have access to ores containing more than 2% copper. U.S. producers, as a result, are no longer market leaders. Making matters worse, he said, is nationalization of some foreign mining industries which has given many non-U.S. producers a huge competitive advantage. Producers must adapt

“If U.S. producers are willing to be adaptable, however, there are plenty of profitable opportunities,” Agarwal said. “For instance, all the bad news we’ve been hearing about the demise of the U.S. steel industry is premature. While it’s certainly true the steel industry did have many obsolete facilities, most of that excess capacity is gone now.

“A lot of those old plants were geographically dispersed — a relic of the necessities of the Second World War — which made them increasingly less competitive in the world marketplace as U.S. transportation and production costs soared. The remaining integrated U.S. steel industry, concentrated in Chicago and on the Maryland and Pennsylvania coastline, will survive and prosper.”

Agarwal predicts relatively big opportunities in materials recycling. “In mature industrial societies such as the U.S.,” he said, “it’s more economical to recycle metals than to produce them from virgin ores. This is an important point. The U.S. has a vast storehouse of metals. Currently, more than 30% of steel industry production is based on recycling, and there certainly is more to come.”Producers can definitely reap reliable, long-term profits from recycling metallic products made from steel, aluminum and copper; it is not so clear they can tie in long-term profits from mining itself, he said.