Out of necessity, miners are looking at operational costs and finding ways to stabilize or reduce costs, while maintaining production with these lower market prices. While some operations have been closed, generally companies are choosing to keep mines open so that they can continue to ship to the market and spread out fixed costs over more tons, even if it is at a loss.
From a broad standpoint, the cost optimization initiatives of companies will be key for not only weathering the short-term storm, but also in re-gaining margins now and over the long term. While long-term optimism remains, the results of those optimistic actions will materialize for those that can find margin enhancement within their operations.
A question asked frequently is whether the supply and demand model currently in place is the “new normal.”
- Roy Hinkamper
KPMG in the US