COVID-19 Impact on Mining Machinery in Semiconductors and Electronics Industry

COVID-19 Impact on Mining Machinery in Semiconductors and Electronics Industry

  • Semiconductors and Electronics
  • Dec 15, 2020

COVID-19 Impact on Mining Machinery in Semiconductors and Electronics Industry

OVERVIEW

As COVID-19 continues to trigger massive global disruption to supply chains, the mining industry is feeling the impact. The mining industry depends heavily on global supply chains for suppliers of machinery, equipment and parts, as well as raw materials to its consumers around the world. In many resource-rich countries, mining is economic bedrock, with both developing and emerging nations benefiting from its crucial position in eliminating poverty, sustainable development and social change.

However, similar to the other economic industries, the mining industry has not been spared the negative effects of outbreaks of COVID-19. In terms of health and safety threats, close working conditions at mine sites put employees on the front line, leading the industry to quarantine workers.

IMPACT ON DEMAND & SUPPLY CHAIN

There are several major manufacturers of mining equipment around the globe whose manufacturing activities were halted due to the COVID-19 pandemic's disrupted supply of components in the mid-lockdown. In the midst of rising military conflicts between these nations, rising demand for mining equipment is expected to intensify across developing countries such as India and China due to expanded infrastructure operations in hilly terrains along the border area.

Supply disruptions in China are causing ripples throughout the global economy, along with the stalling of industrial production. Global mining economies (such as Australia, Brazil, Chile, the US, South Africa, and Peru) are feeling the heat as market sentiment degrades. A decline in demand from various end-use industries has had a major negative effect on these economies, which are heavily dependent on exports of minerals and metals, with a large portion of the mining sector contributing.

The mining giants such as Rio Tinto, BHP Billiton, and Anglo-American, have reported a slowdown in operations across South Africa, Columbia, Canada and other countries due to lockdown imposed earlier. The uncertainty around duration and impact on the pandemic is making difficult for the companies to quantify the impact on supply/demand and timely recovery. In order to limit the spread of virus companies have been shutting/ isolating operations with re-exercising their flying-in-fly-out (FIFO) roster of workers.

Demand for metals and minerals spiraled between January and February 2020, with the low-capacity automotive and manufacturing sectors and major manufacturing regions (such as China, Japan and Germany) locked down. Owing to their reduced scale of operations, financing problems, and trouble getting new projects, small and medium-sized miners are likely to face a big blow.

STEPS TAKEN BY MINERS

Mining operations will slowly resume as the global economy recovers, but we won't be able to afford business as usual. There will be a need to develop new and permanent procedures and working standards, which will entail new regulatory mechanisms and investments. Resilient protections must be established by the mining industry.

In order to insulate the labor market and supply chains against the unavoidable repetition of similar incidents, the industry needs to create resilience. The sustainability of the mining industry depends heavily on stable and predictable market conditions and supply chains that are working. Acute uncertainties, risks to production and efficiency, with implications for workers, suppliers and local economies, may result from any significant disruption to the global economy. Although large-scale mining significantly contributes to the national incomes of many developing countries due to its capital-intensive existence, it is not a major direct employer.

Large-scale mining operations are concentrated in rural areas with a few significant alternate sectors of the economy. For hosting societies, the mining industry plays a crucial role, where it is the sole job creator and supplier of basic resources such as health care and education. By establishing commercial operations to serve the mines, local recruitment builds spillovers of workers. By satellite economics, operations such as hotels, bars, shops and many others, jobs provides many opportunities in the local area to develop the economy. The stronger the linkages are the greater the influence of the ties on indirect and mediated work.

CONCLUSION

COVID-19 has unleashed numerous economic shocks. On the supply side, as a result of abrupt plant closures and the temporary suspension of air, maritime and land transport, among others, lockdown steps are disrupting global supply chains.

On the demand side, consumption has been drastically decreased by limits on the movement of citizens and the closure of non-essential economic activities. This results in large outflows of capital from emerging markets. Despite the efforts of policymakers to strengthen local content regulations, the unexpected disruptions in global supply chains highlight mining operations' reliance on global sourcing. The compounding effects of national border and factory closure policies, delays in inputs and deliveries, and increasing global sourcing costs intensify the risk of overdependence on these global markets.

The uncertainties in this ongoing crisis is that while business will have to resume, it is unlikely that it will be business as normal, in addition to the uncertainty surrounding the speed and time of the global economic recovery. New and permanent procedures will have to be placed in place for health and safety. Governments need to improve regulatory frameworks to ensure that their mine safety regulations are consistent, while being more stringent in their implementation and on-the-ground inspections. To avoid any potential contamination of the disease from outside, steps need to be applied to the local community.

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