Defining the Essentials of the Mining Industry

Objective

After completing this lesson, you will be able to define industry characteristics, challenges, and opportunities faced by a business in the Mining industry.

Introduction

Mining is one of humanity's oldest industries, focused on exploring, extracting, and processing natural resources from the Earth. Today, it serves as a foundational industry that provides essential raw materials for numerous sectors including construction, manufacturing, technology, and energy production.

Within SAP, mining falls under the Industry Business Unit for Mill Products and Mining.

Watch the following video to understand the complexity and interdependence that characterizes this Business Unit.

Overview by Region

Let's take a look at global mining production by region.

This bar graph titled World mining production shows the growth in global mining output measured in billion metric tons across three different years. Starting at 9.6 billion metric tons in 1985, production increased to 11.3 billion metric tons by 2000, and then significantly rose to 18.7 billion metric tons in 2022, illustrating a substantial upward trend in worldwide mining activity over this 37-year period.

Global mining production has undergone remarkable growth over the past few decades, with total output doubling to reach 18.7 billion metric tons by 2022. This dramatic increase reflects the industry's response to growing worldwide demand for raw materials across all sectors of the modern economy.

This donut chart titled Total mining production 2022 by continents displays the global distribution of mining production across different continents. Asia dominates with 61.7% of total production, followed by Latin America at 15.3%, while North America, Europe, Oceania, and Africa contribute smaller shares ranging from 6.8% to 4.9%, offering a clear visualization of regional mining output disparities worldwide.

Asia has emerged as the dominant force in global mining, now accounting for nearly two-thirds of worldwide production. This remarkable share, approximately 62% of global output, showcases the region's tremendous influence on the mining sector. North America maintains a significant presence as well, contributing 15% of global production, while other continents each account for between 5-6% of the world's mining output.

This world map visualization titled Declining production rates only in Europe since 2000 illustrates the percentage changes in mining production across different regions, with Europe showing a notable decline of -35.6% while other regions experienced growth - North America at +23.3%, Latin America at +11.0%, Africa at +19.1%, Asia at +128.0%, and Oceania at +139.9%, using different shades of blue to distinguish between regions and their respective growth rates.

The period between 2000 and 2022 witnessed substantial changes in regional mining dynamics. Oceania, primarily driven by Australia's robust mining sector, demonstrated impressive growth with a 140% increase in production. Asia's expansion was even more dramatic as well, achieving a 128% increase during this timeframe. While most regions experienced growth, Europe stood as an exception to this trend.

This donut chart shows the distribution of global mining production among the world's largest mining nations in 2022, with China leading at 26.4% of total production, followed by the USA at 12.2%, Russia at 8.5%, and Australia at 5.9%, while all other nations collectively account for 46.0% of global mining output, with the data presented in varying shades of blue in a donut chart format.

The concentration of mining power in a few key nations has become a defining feature of the industry. By 2022, just four countries were responsible for more than half of global mining production. China has established itself as the undisputed leader, generating more than 26% of worldwide output, followed by the United States, Russia, and Australia. China's dominance is particularly striking, as it leads global production across 28 different commodities, spanning the entire alphabet from aluminum to zinc.

Growth Drivers and Strategic Importance

Several fundamental factors drive this continued growth in mining production. The world's expanding population, coupled with increasing urbanization, creates an ever-growing demand for mined materials. Rising living standards across the globe further amplify this demand, as improved quality of life typically correlates with increased consumption of products that require mined materials.

The strategic importance of mining cannot be overstated in today's interconnected global economy. As the primary source of metals and minerals, the mining industry serves as an essential foundation for virtually every other industrial sector, making it a cornerstone of modern economic development and technological advancement.

Overview by Commodity

The Evolution of Mining Commodities

The mining industry produces an extensive range of commodities that can be organized into five distinct segments, each serving crucial roles in our modern economy. While traditional high-volume commodities like coal, iron ore, bauxite, and potash continue to dominate production, recent years have seen dramatic shifts in demand patterns, particularly driven by new technologies.

Mineral Fuels

This fundamental segment primarily comprises different types of coal and uranium, representing one of the most significant areas of mining production. Thermal coal, also known as steam coal, serves as a primary energy source for power generation.

This stacked bar chart titled Steady increase in Steam Coal production demonstrates the growth in steam coal production across major producing countries from 2000 to 2022. The graph shows production volumes for China, India, Indonesia, USA, Australia, and other countries using different shades of blue, with the y-axis measuring production up to 8000 units (million tons), revealing a consistent upward trend in total production over the 22-year period.

Despite the growing emphasis on renewable energy and battery materials, thermal coal production has doubled since 2000, underscoring the persistent importance of traditional energy sources in the global economy. Metallurgical coal distinguished by its lower impurity content, plays a crucial role in steel manufacturing, serving as both fuel and reducing agent. Lignite, commonly referred to as brown coal, primarily serves local power generation needs due to its high moisture content, which makes long-distance transportation impractical. This localized usage pattern has led to the strategic placement of power stations near lignite mining sites to maximize efficiency.

Iron and Ferro-Alloys

These materials form the backbone of the steel industry. Ferro-alloys combine iron with elements like manganese, chromium, and nickel to enhance steel's properties. This combination creates materials essential for construction, manufacturing, and infrastructure development.

Non-Ferrous Metals

This diverse category includes metals without significant iron content, such as aluminum, copper, lead, zinc, and tin. Aluminum, derived from bauxite ore, exemplifies this group's importance, finding widespread use in aerospace and other industries due to its lightweight properties and corrosion resistance. The category also includes increasingly vital rare metals like cobalt and tungsten, as well as rare earth minerals essential for modern electronics and renewable technologies.

This stacked bar chart shows the dramatic increase in global Lithium oxide (Li2O) production from 2014 to 2022 across major producing countries. The visualization uses different shades of blue to represent production volumes from Australia, Chile, China, Argentina, Brazil, and other countries, with the y-axis scaled up to 400,000 units, demonstrating particularly sharp growth between 2020 and 2022 when production nearly doubled.

Recent years have seen extraordinary growth in the production of materials crucial for renewable energy and battery technology. Lithium oxide production has increased sevenfold since 2014, while cobalt and nickel production have shown remarkable growth to meet the demands of the green energy transition.

Precious Metals

Gold, silver, and platinum group metals constitute this category, serving both industrial applications and jewelry production. These metals maintain their value due to their rarity and diverse applications in both industrial and decorative contexts.

Industrial Minerals

This broad category encompasses materials that serve as raw inputs for various industries, from construction to agriculture. These minerals play essential roles in manufacturing processes and product development across multiple sectors.

Global Supply Dynamics

A notable characteristic of the mining industry is the geographic concentration of certain crucial materials. For instance, the Democratic Republic of Congo dominates cobalt production with 70% of global output, while China leads in graphite and rare earth minerals production with similar market share. This concentration of resources has significant implications for global supply chains and industrial strategy.

This image shows three donut charts displaying the global production distribution of key battery minerals - Lithium, Cobalt, and Graphite. For Lithium, Australia leads with 43.3% followed by Chile at 31.9% and China at 16.7%. The Cobalt chart shows DR Congo's dominant position with 69.5% of global production, with smaller contributions from Indonesia (5.4%) and others. In the Graphite chart, China overwhelmingly leads with 67.2% of production, while Mozambique and Madagascar contribute 9.6% and 4.8% respectively. Each chart uses various shades of blue to distinguish between different countries, with smaller producers grouped under Other.

Source: World Mining Data 2024 – Federal Ministry Republic of Austria Sustainability and Tourism​

Top 50 Biggest Mining Companies–Market Cap (July 2024)

Mining.com updates their top 50 ranking of the world’s most valuable miners every quarter. As of the latest update, these companies had a combined market capitalization of USD1.43 trillion, an increase of USD42 billion from the end of March, driven by rising copper and gold prices that offset losses among lithium and iron ore counters.

This list excludes unlisted and state-owned enterprises, smelter companies, and commodity traders whose primary business is not mining. Entities that only own minority stakes in mining assets are also excluded at the outset due to a lack of available information.

List of the Top 50 biggest Mining Companies by Market Cap (July 2024).
List of the Top 50 biggest Mining Companies by Market Cap (July 2024).

While the top 50 list is updated approximately every six months, there are fluctuations where some companies drop out and new ones enter. Despite these changes, we consistently maintain relationships with the majority of companies on the list, all of whom use SAP solutions to run their ERP processes. Many of these companies are long-term SAP customers.

Lesson Summary

  • Historic Foundation: Mining stands as one of the oldest human industries, remaining crucial for providing essential materials across all sectors of the modern economy.
  • Global Scale: Production has reached 18.7 billion metric tons by 2022, with Asia producing 62% and four major countries controlling over half of global output.
  • Product Diversity: The industry spans five main commodity categories, with emerging focus on materials for renewable energy while maintaining traditional mining activities.
  • Economic Impact: Major mining companies maintain substantial market value ($1.43 trillion for top 50), driven by continued global development and urbanization.
  • Growth Drivers: Sustained demand stems from increasing population, urbanization, and rising living standards worldwide.

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