Image credits: pixabay
/
Analysis

Reshoring, Nearshoring: Opportunities for Mining

By Karin Dilge | Mon, 08/29/2022 - 11:26

Boosted by the global energy transition, demand for lithium is pushing the market to bullish levels. Within this environment, China is currently in the lead but other countries such as Mexico could look to compete, said Henry Sanderson, Executive Editor, Benchmark Mineral Intelligence, provided investment confidence can be granted. 

“What supply chains thrive on is predictability,” said Simon Geale, Executive Vice President of Procurement, Proxima, in an interview with CNBC. “At the moment, China is predictably unpredictable,” Building a supply chain outside of China should be prioritized by Western countries and companies, says Sanderson.

According to a report by the global organization EY, in response to the pandemic, North American industrial firms have already started to bring production and suppliers closer to home to reduce complexity and ease delays. This has been amplified by the US government’s support for domestic manufacturing and sourcing. Furthermore, geopolitical tensions and other disruptions have increasingly impacted operations in China, explains EY. “A US industrial manufacturer recently shuttered a 1,000-worker factory after 25 years of operation, with tariffs cited as a likely direr. Similarly, a Japanese electronic components player announced a new production facility in Thailand to help diversify its supply chain away from China,” says the organization. 

Sanderson asserts that building this supply chain could be difficult and take time, as China dominates the midstream of the industry. Nonetheless, he argues it is possible to build the processing capabilities to compete with the eastern country. Reshoring is a costly process, however, so companies must be careful to not let expenses run higher than they are in China.

Key challenges include access to the raw material, access to regional refining and rising operational costs. He states that the more the prices go up, the cost of electric vehicles also increases. 

Some of the efforts the Western hemisphere is already pushing to reshore its supply chains include a US$600 billion mineral security partnership to build the global infrastructure to compete with China’s Belt and Road Lithium Mining. Other initiatives include the EU-Japan Green alliance, as well as an EU-Canada partnership regarding raw materials. 

Henderson states that battery production is the “easy part,” however, when it comes to the lithium supply chain. The extraction, chemical processing, cathode and anode production, cell manufacturing and application of the mineral will be more difficult to master, he says.

Lithium, says IEA, will possibly face a bottleneck in chemical production as many small producers are financially constrained after years of depressed prices. Despite the challenging environment, mining will continue to advance as demand drives the industry forward, said Armando Alatorre, President, the College of Mining Engineers, Metallurgists and Geologists of Mexico (CIMMGM): “The key to improve the industry’s situation is to change the discourse regarding the sector at a global level. We are not the great environmental enemy of the planet.” 

Increasing natural gas and oil prices are making manufacturing tougher, too. “It is going to be difficult to build new battery material processing plants and refineries in Europe against this backdrop,” added Henderson. However, he sees many industrial processes moving to areas where clean energy development is strong and energy prices are therefore lower, such as Quebec, with mining companies acting as drivers for the creation of these sustainable industrial hubs.

The data used in this article was sourced from:  
MBN, EY, PwC, IEA
Photo by:   pixabay
Karin Dilge Karin Dilge Journalist and Industry Analyst