Mining New Value from the Circular Economy

from the circular economy With economies seeking to tap into the $4.5 trillion opportunity from eliminating waste through the circular economy, how can established mining and metals companies safeguard their market share while also tapping into a rich new value source? In this era of epic disruption, circular business models are challenging the status quo, increasing pressure on mining companies to adapt fast, embrace change and stay relevant. Shifting downstream demand is creating risk as more innovative players capitalize on emerging opportunities to monetize circularity. But by taking the right steps today, mining and metals companies can reposition for success to create sustainable new revenue streams in the circular economy.MINING NEW VALUE FROM THE CIRCULAR ECONOMY2#CircularMining The future in flux The shift to the circular economy is impacting all aspects of the mining and metals industry. Take gold, for example. At today’s prices, the gold in one mobile phone is worth about $1 and 41 mobile phones can yield as much gold as one tonne of gold ore.1 So, should mining companies switch their attention from tried and tested traditional exploration methods to focus instead on urban mining in electronic waste dumps? Let’s run a quick fact check. Annual gold production was just over 3,000 tonnes in 2017,2 so to get the equivalent volume from urban mining would require 95 billion discarded phones.3,4 Considering there are ‘only’ about five billion mobile phones in circulation,5 it looks like we’ll be mining gold ore for a while to come. However, across the entire mining and metals industry, as in gold, supply chains are changing—raising questions as to how future-ready incumbents are to respond as markets move.MINING NEW VALUE FROM THE CIRCULAR ECONOMY3#CircularMining Rising to the recycling challengeAs the global recycling market for metals matures and grows, mining and metals companies must adapt accordingly. Today, ferrous scrap is the most recycled material worldwide. According to the Bureau of International Recycling, 40 percent of steel production is made from scrap and the size of the metals recycling market is projected to grow from $277 billion in 2015 to $406 billion by 2020, at an estimated CAGR of eight percent.6 It’s a similar picture for aluminum and copper. And for precious metals, the rates are even higher. The issue for mining and metals companies is twofold: Firstly, they’re not always well positioned to monetize the recycling flow and secondly, increased circularity will impact primary demand. Furthermore, as waste and material losses are eliminated over time—for example, as we move to additive manufacturing—the knock-on effect on primary demand will likely be significant. MINING NEW VALUE FROM THE CIRCULAR ECONOMY4#CircularMining Manufacturers taking the leadIn the last five years, the consumer goods, retail and automotive sectors have blazed a trail for circular ambition, setting new standards in innovation. Many of us are familiar with car-sharing schemes such as Lyft, lighting as-a-service pioneered by Philips, and Nike’s Flyknit shoe. The 2019 Circulars Awards,7 held in Davos in January 2019, showcased more than 450 examples of circular economy leadership. But in the mining and metals sectors, such examples of circular innovation are comparatively scarce. Industry attention to date has largely focused on the circular economy as a route to operational efficiency, for example, recycling water or monetizing waste streams such as slag or used tires. The bigger question—and opportunity—of how to drive value from changing market demand, remains largely untapped. MINING NEW VALUE FROM THE CIRCULAR ECONOMY5#CircularMining Mining and metals companies at riskAs circular models are increasingly adopted by innovative companies further down the materials supply chain, failure to get to grips with the circular economy puts mining and metals companies at risk.Manufacturers are getting better at recovering their investment in natural resources in ‘closed-loop’ cycles. What’s more, these new circular business models are disrupting historical links between ownership and sales growth.In the automotive sector, for example, ride-sharing models mean that by 2035 the global inventory of passenger vehicles in use may be 25 percent smaller than historical models would suggest.8 In shipbuilding, Maersk’s ships reuse 95 percent of their materials and parts thanks to tracking with a resource ‘passport’.9 And construction and mining equipment manufacturer Caterpillar takes back over 80,000 tonnes of product from customers annually and remanufactures it into a good-as-new condition10. If all the innovation is happening downstream, mining and metals companies risk losing market share.MINING NEW VALUE FROM THE CIRCULAR ECONOMY6#CircularMining Changing demand patterns These changes are converging against a backdrop of potentially slowing demand for many metals as economies