Optimism has returned

PwC's 21st CEO Survey: key findings from the mining and metals industry

Like their global counterparts, mining and metals CEOs are in a cautiously optimistic mood. Two-thirds expect global economic growth to improve in the next 12 months and almost nine out of ten are confident that their organisation will grow revenue over the short and medium term (see exhibit 1). Half say they will increase headcount in the coming year. Industry leaders are no doubt buoyed by rising levels of overall business confidence, which is typically a marker for increased investment and higher demand for mining and metal products.

Organic growth and costs are the preferred growth strategy, but is something missing?

For mining companies, a focus on organic growth – working existing assets and projects harder and smarter – makes sense. Given the current low appetite for expansive capital expenditure from boards and shareholders following the M&A boom, miners have few available options but to find smarter ways to work their mines and to deliver brownfield projects.

For both mining and metals CEOs, cutting costs continues to be an important growth strategy. But given the lower margins and higher transparency around costs in the metals sector, reducing costs and improving efficiencies is almost an existential issue.

For metals companies, growth may require nothing short of a complete transformation of their cost structures and productivity positions, as well as a renewed focus on building industry-leading capabilities to address increasingly complex product and service requirements.

Changes as substantive as these may require the establishment of new partnerships and alliances from both inside and outside the sector. But with less than half of CEOs considering strategic alliances, they may be missing a valuable opportunity to gain competitive advantage and drive growth.

Managing threats by getting agile

Volatility and regulatory issues – including tax – top this year’s list of perceived threats to business growth. Almost half (47%) of mining and metals CEOs are ‘extremely concerned’ about the

increasing tax burden, and four out of ten worry about geopolitical uncertainty, volatile commodity prices, and over-regulation.

It’s understandable that CEOs are troubled by these issues: they are all largely outside of a company’s direct control. But the key to managing external threats is to ensure that the business is agile and flexible enough to respond when circumstances change.

Thinking about how the business model might respond under complex scenarios can help identify areas where greater agility is required to allow the company to cope with periods of volatility. For example, companies can plan for what levers can be pulled when circumstances change and forecast how quickly the impact will be felt. They can investigate opportunities for price adjustments, for how quickly capital expenditures can be reduced and how fast a workforce can be redeployed. 

Contact us

Jock O’Callaghan
Global leader, Mining & Metals, PwC Australia
Tel: +61 3 8603 6137

Dr Nils Naujok
EMEA Metals Consulting Leader, PwC Germany
Tel: +49 30 88705 855

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