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Shortage of minerals and metals a concern for manufacturers: PwC


A new study finds that global manufacturers are sounding a cautious note over the scarcity of minerals and metals they need to build everything from cell phones and jet planes to cars and trucks.

A poll from business consultancy firm PwC found that 77 percent of manufacturers surveyed said they believe tighter supplies are causing stress for their suppliers.

PwC said that the most concerned industries include infrastructure, high-tech hardware and the auto sector.

The study points to both dysprosium, a rare earth metal used in super magnets, and tantalum – a component of aircraft and medical equipment, automotive electronics, mobile phones and LCD screens – as two resources that are under pressure due to increased demand.

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Both specialty metals have “experienced explosive price increases in recent years,” the report said.

PWC did not say whether the shortage of special metals and minerals will increase prices of consumer electronics, cell phones and other popular products in the coming years. But it said companies are worried as they see supplies dry up.

“Manufacturers recognize that the lack of minerals and metals is a serious issue, but it’s not as clear whether various industry stakeholders are aware and are being responsive to the matter,” said Calum Semple, consulting partner and leader of the operations practice at PwC in Toronto.

According to the survey, 83 percent of respondents indicate their suppliers consider minerals and metals scarcity an issue, and 61 percent believe their customers are taking the issue seriously.

The report, Minerals and metals scarcity in manufacturing: A ‘ticking time bomb,’ surveyed 69 senior executives in seven different manufacturing industries – infrastructure, high-tech hardware, automotive, renewable energy, chemicals, energy and utilities, and aviation – across the Americas, Asia Pacific region and Europe.

Past reports have noted scarcity of a variety of metals, from beryllium to cobalt, many of which are mined and produced in Canada.

Beryllium is used as a lightweight component in military equipment and in the aerospace industry. It is used in high-speed aircraft, missiles, space vehicles and communication satellites.

Cobalt is used in making jet turbine engines and auto rechargeable batteries.

Other materials in short supply are flurospar, used in construction, cement, glass, iron and steel castings and lithium, needed to make wind turbines and lithium-ion batteries in hybrid cars.

Semple said the metals shortages also force companies to find new ways to secure supplies.

“Buying power, co-ordinated purchasing policy, recycling and extraction, upgrading technology and forward contracts with key suppliers are just a few of the current and potential opportunities resource scarcity presents to manufacturers,” he said.

Most regions and industries globally view an increase in demand as the primary cause for minerals and metals scarcity (84 percent), followed by geopolitics (79 percent) and extraction shortages (73 percent).

“With growing GDP levels and with the world’s population surpassing seven billion people, consumption levels are rising, which in turn is creating a high demand for resources,” says Semple. “Raising awareness and developing new business models to help manage the urgency of this issue is a necessary task for both companies and governments.”

Respondents from the automotive sector (82 percent) have the most positive outlook when it comes to finding opportunities over the next five years in the midst of a metals and minerals shortage. Overall, 43 percent of respondents across all industries view scarcity as a current opportunity, while 59 percent of respondents say the opportunity will grow in the next five years.

Europeans remain the most optimistic with 58 percent perceiving an opportunity at hand, whereas only 35 percent of respondents from North and South America sense potential for good prospects.

To read the full report, visit http://www.pwc.com/resourcescarcity.