Key takeaways: What you need to know

Key takeaways: What you need to know

Key takeaways from KPMG International's Metals and Mining Outlook 2016.

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Finding 1: Confidence in the global economy is low and metals organizations are ramping up their focus on cutting costs and performance improvements.

How are leading metals manufacturers responding?

  • Working with national governments and regulators to advocate for greater consolidation across the sector and the reduction of structural capacity in key markets 
  • Focusing on products where they enjoy clear market or cost advantages in order to reduce the impact of commodity competition from lower-cost producers 
  • Reinvigorating their efforts to identify and leverage efficiencies across the entire product portfolio.

 

How are leading mining organizations responding? 

  • Maintaining a strong focus on capital and capital deployment to prioritize cash flow returns over increased production volumes 
  • Becoming more decisive about managing their balance sheets to focus on free cash flow generation
  • Improving the discipline around the management and use of their resources and ore bodies to focus on higher-growth or higher-margin commodities.

Finding 2: Metals organizations want to expand market share and will adjust their investment strategies to achieve lower costs and improve access to customers.

How are leading metals manufacturers responding?

  • Rethinking their global footprint to growth markets while taking advantage of opportunities for improved cost structures
  • Aligning their growth investments with expected shifts in customer footprints as key sectors – such as auto-body manufacturing – move closer to customers in lower cost and growing destinations
  • Understanding the impact of new and emerging trade tariffs, barriers and protections within key markets and reassessing the make versus import equation.

 

How are leading mining organizations responding?

  • Exploring opportunities to purchase high value assets in new geographic markets to improve cost efficiencies or drive scale
  • Rigorously assessing the potential risks involved in new acquisitions to improve project certainty and confidence around earnings and cash flow
  • Continuing to reshape their portfolio of assets, products and markets to create the optimal footprint for sustainable growth.

Finding 3: Metals organizations expect to pour significant investment into R&D over the coming years in an effort to drive new growth and open new markets.

 

How are leading metals organizations responding?

  • Investing into R&D to develop more sophisticated, value-added products to offset pricing pressures on commoditized products
  • Partnering with customers – and even competitors – to share development costs and create new products that meet evolving customer needs
  • Investing into new technologies that create opportunities for greater operational efficiency and business flexibility. 

 

How are leading mining organizations responding?

  • Investing into technologies that improve automation, enhance efficiency and improve safety across the mining operation
  • Rethinking the technology investment roadmap to prioritize cash flow and margins while managing capital and costs.

Finding 4: Metals organizations are worried about the potential for supply chain failures but most lack complete visibility into their supply network.

How are leading metals manufacturers responding?

  • Exploring opportunities to improve transparency across their supply chain, both upstream and downstream
  • Implementing new technologies and applying Data and Analytics to identify opportunities to improve supply chain efficiency and flexibility
  • Improving the sharing of data between metals customer, suppliers and operations through new IT platforms and tools.

 

How are leading mining organizations responding?

  • Assessing the sustainability of price increases and demand rises to adjust production accordingly
  • Learning how to improve supply chain efficiency and visibility from other manufacturing sectors such as automotive
  • Shifting the supply chain focus from development to operations.

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Global Metals & Mining Outlook 2016

Global Metals & Mining Outlook 2016

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